USD/IDR: Seesaws around 12-day low, Bank Indonesia Rate decision in focus

• USD/IDR sellers catch a breath near the monthly bottom.
• The Indonesian rupiah (IDR) cheers US dollar weakness, fails to portray the coronavirus crisis at home.
• Bank Indonesia (BI) is expected to roll out third rate cut of the year.

USD/IDR remains under pressure while taking rounds to 15,890 amid the Asian session on Tuesday. Despite a surge in the coronavirus (COVID-19) infections in Indonesia, the pair cheers the broad US dollar weakness while trading around the lowest since March 27, 2020.

Bloomberg cites Indonesia having the world’s lowest COVID-19 testing rates while stating President Joko Widodo’s latest push to ramp-up the testing capacity by 9,000 samples per day. The news also mentions Indonesia’s death toll of 399 till April 12 as the highest after China, not to forget 4,557 cases as of Monday.

On the other hand, the US has witnessed more than 20,000 deaths and above 530,000 infections during the same period that make it the global hotspot of the virus.

As a result, the risk-tone gets heavy with losses on Wall Street and the market’s rush to exit from the US dollar, which in turn helped the rest of the currencies like the IDR.

Recently, US President Donald Trump and his administration members tried to placate traders, which in turn could be witnessed in the recovery of the US stock futures. However, fears of the pandemic could keep weighing on the trade sentiment and will be worth following.

Considering the Bank Indonesia’s Rate decision, analysts at TD Securities said, “After having cut its benchmark interest rate twice this year, we expect a third rate (25bp) cut from Bank Indonesia. BI is also likely to focus on other measures including new powers to purchase bonds in the primary market as well as providing more liquidity to banks. The sharp fall in IDR over recent weeks may also be met with further measures to help shore up the currency. Very low inflation taken together with a sharp deterioration in activity suggests BI will continue to remain in easing mode over the next few months.”

Other than the BI’s rate decision, virus updates and comments from the US policymakers will also be the key to watch for fresh impetus.

Technical analysis

A downward sloping trend line from April 01, near 15,940, can restrict the pair’s immediate recovery ahead of a 21-day SMA level of 16,100. Meanwhile, March 27 low near 15,440 could lure sellers below the monthly low surrounding 15,625.