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Analysts at MUFG Bank, see the Indonesian Rupiah falling against the US Dollar modestly until the first quarter of next year. They forecast USD/IDR at 14250 by Q4 2019 and at 14000 by Q3 2020.  

Key Quotes:

“During September the Indonesian rupiah strengthened against the US dollar in terms of London closing rates from 14,195.0 to 14,190.0. Bank Indonesia (BI) cut the benchmark seven-day reverse repo rate by 25bps to 5.25% on 19th September.”

“It was a tale of two halves for the Indonesian rupiah in September as it strengthened against the dollar during the first half of the month on concessions made by both US and China on the trade front. Most of the rupiah’s gains were pared back during the second half of September due to the spike in oil prices on geopolitical risks, and dollar support from the start of policy easing by the ECB, a less dovish Fed, and Trump impeachment risks.”

“We continue to expect the rupiah to be under pressure in Q4 2019 as the dollar remains supported on more aggressive easing by the ECB, “no deal” Brexit risks, Trump impeachment risks, and fragile risk sentiments against the backdrop of a slowing global economy and trade war. Improvements in trade balances, driven primarily by a drop in imports, could help contain rupiah losses. The total trade deficit between January-August this year is at USD2.6 bn, versus USD4.2 bn during the same period last year.”

“Note that sluggish import growth is in part due to the government’s rules to clamp down on consumer goods imports in order to stabilise the rupiah, and weak external demand which in turn led to a drop in import of raw materials and capital goods. Weaknesses in private consumption, capex and external demand are likely to weigh on real GDP growth and warrant further easing by BI after three successive 25bps rate cuts since July.”