- IDR pulls back from multi-week highs, as Indonesia’s central bank leaves the door open for future rate cuts.
- The bank kept benchmark rates unchanged on Tuesday versus expectations for a rate cut.
- The dovish forward guidance may weigh over the IDR in the short-term.
Indonesian Rupiah has retreated from two-month highs registered on Tuesday, possibly due to Bank Indonesia’s (BI) dovish forward guidance.
The local unit is currently trading at 14,820 per US dollar, having hit a high of 14,790 on Tuesday.
While the BI surprised markets by keeping interest rates unchanged at 4.25% on Tuesday, it left the doors open for future rate cuts. The bank has room to cut rates as inflation remains low and the economy is facing downward pressure due to the virus outbreak.
While BI’s dovish talk favors losses in the currency, the losses will likely be limited as risk sentiment looks strong with the futures on the S&P 500 reporting a 0.6% gain at press time.
The global stock markets picked up a bid on Monday after the US-based Moderna announced “positive” results from an early-stage human trial of their preventive coronavirus vaccine. On Tuesday, scientists raised questions over the reliability of the results, sending the US stocks lower.
However, looking at the uptick in the S&P 500 futures, it appears as though Wall Sreet would reverse Tuesday’s losses on Wednesday. As a result, the safe-haven dollar may decline across the board.
Technical levels
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