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  • Indonesia’s Rupiah hits multi-month lows, having risen by over 7% last month. 
  • Bank Indonesia is expected to cut rates on Tuesday.

Indonesia’s Rupiah is trading at $14,825 at press time, the highest level since March 17. 

The local currency gained 7% last month and is currently reporting a 2% month-to-date gain. The notable appreciation would provide room for Bank Indonesia (central bank) to focus on bolstering the economy amid the coronavirus pandemic.

The central bank will cut its benchmark rate by 25 basis points Tuesday to 4.25%, according to 19 of 25 economists surveyed by Bloomberg. The central bank had left rates unchanged last month, having delivered cuts in the preceding two months, and had signaled the possibility of another rate cut in the near-term. 

Rate cuts typically weaken currencies. The IDR, however, has gained, possibly on optimism that a cut in the borrowing costs would help avoid a sharp economic downturn. 

The coronavirus pandemic has taken a toll on Indonesia’s economy over the past two months, forcing the government and the central bank to slash their respective growth forecasts. Gross domestic product for 2020 is now expected to expand by 2.3%, compared to an initial projection of 5.3%. Growth, however, is seen rebounding next year to 6.6%-6.7%.

Investors may take profits on IDR longs on Tuesday if Bank Indonesia delivers rate cut, as expected. 

Technical levels