Indonesian Rupiah Slides Vs Pound On Surprise BI Rate Cut

After trading within a narrow but rising channel over the course of the last week, the UK pound to Indonesian Rupiah (GBP/IDR) exchange rate popped higher - targeting the upper bound - on Thursday in the wake of a surprise rate cut from Bank Indonesia (BI).

Still comfortably within the range, Sterling was last seen trading up 0.18% on the day against the Rupiah at IDR 17282.98.

For further trading data information, best pound travel money rates and historical data see the page on British Pound to Indonesian Rupiah (GBP/IDR) Exchange Rate

Bank Indonesia Preemptively Cut Rates to Sustain Growth

Catching markets largely off-guard, BI Governor Warjiyo unveiled a surprise rate cut on Thursday, trimming the seven day repurchase rate to 5.5% in a bid to preempt anticipated headwinds arising from the continued US-China trade war.

In line with recently re-elected President Joko Widodos (aka Jokowi) bid to stimulate growth, the central bank lowered interest rates to help insulate Indonesias economy as global growth continues to cool and rising protectionism threatens to undermine the Asian nations export industry. The move is expected to help Indonesian growth maintain the forecast of 5.1-5.5% GDP growth for 2020.

Governor Warjiyo indicated that the rate cut was a preemptive move to support economic growth as he vowed to ensure ample liquidity to help foster accelerated growth, wrote ING economist Nicholas Mapa, adding Recent trade numbers illustrate how Indonesia has returned to a trade deficit, indicating the ill effects of the US-China trade spat are already weighing on Indonesias export engine.

While not confirming further rate cuts ahead, Warjiyo did say that the central bank would retain its accommodative policy mix, leaving the door open for further easing. The outlook for Indonesian monetary policy likely depends on developments on both the trade-front and in terms of US monetary policy moving forward with markets awaiting Fed Chair Powells speech at the Jackson Hole Symposium to set the tone.

While the IDR was modestly lower on the back of the surprise cut, the outlook could entail Rupiah gains given prudent central bank efforts to maintain growth in the face of a deteriorating external outlook.

its all hands on deck for Jokowis bid to get growth a decent shot in the arm, which could entice some interest from foreign players to return (and prop up IDR) as Jokowi and co. chase faster growth going into 2020, added INGs Mapa.

Sterling Creeps Higher as PM Johnson Dines with French Pres. Macron

Sterlings been relatively subdued over recent sessions with mixed messages on the Brexit front leaving GBP exchange rates to trade within the confines of narrow ranges as markets await Brexit-based directional cues.

This weeks focus has been centred on arch-Brexiteer PM Johnsons latest efforts to avoid no-deal Brexit at the end of October. In a four-page letter to EU Council leader Donald Tusk earlier in the week, BoJo requested a renegotiation of the Irish backstop component of the EU withdrawal agreement - a key stumbling block for the thrice-rejected deal.

The response from EU leaders has been mixed with officials initially sticking to the well-worn line that the deal is the only one on offer and cant be revisited while more recent comments have suggested some senior EU peers would entertain alternative arrangements.

Moreover, a number of critics of the PM accused the efforts of being disingenuous - stating the latest efforts have no real chance of bearing fruit and that they are merely an attempt to shift blame for no-deal Brexit onto the EU.

Ahead of the meeting between Macron and Johnson on Thursday - the first face-to-face discussion since Johnson was elected British PM - Macron dashed hopes for progress, stating Johnsons proposed alternatives were unworkable while also commenting that without significant political changes in the UK, he at least would be unwilling to grant any further Brexit delays.

the governments tactics – which appear to involve undermining potential negotiations with the EU, to challenge efforts by MPs to block a no-deal outcome, as well as to interfere in the EUs internal functioning – make a no-deal outcome look increasingly inevitable, wrote Barclays analysts in a research note, adding Based on these tactics, the risks are growing that the EU does not grant an extension even if the government requests it.

While Johnsons efforts are expected to fail, the Pound has also found support on hopes that a Labour-led push to oust the Government when lawmakers return to parliament in early September could open avenues to avoiding no-deal Brexit with analysts expecting increased volatility.

EU leaders will be watching closely to see if the UK government can survive a potential vote of no confidence in the opening weeks of September following parliaments return from the summer recess, wrote MUFG analysts, adding The heightened state of Brexit and political uncertainty in the UK should keep pound volatility elevated.

Thursdays data was wholly underwhelming although the market impact for the Pound to Rupiah rate at the time of writing was muted amid overriding Brexit drivers and the BI rate cut. According to the Confederation of British Industrys latest release, retail sales volumes and orders both fell at their fastest since December 2008 while retailers expect the sharpest deterioration in business conditions since February 2009 over the coming quarter with the index plunging to -49.

Sentiment is crumbling among retailers, and unexpectedly weak sales have led to a large overhang of stocks. With investment intentions for the year ahead and employment down, retailers expect a chilly few months ahead, wrote CBI deputy chief economist, Anna Leach, adding It is unsurprising that business confidence has deteriorated sharply, with a potential no-deal Brexit on the horizon.

In the near-term, ING analysts expect notable upside to remain off the cards for Sterling amid considerable Brexit uncertainty: Although German Chancellor Angela Merkel opened the door for the UK to come up with an alternative to the Irish backstop, in reality the odds of a workable solution (that would be accepted by the EU and the UK parliament) appear to be quite low, wrote chief EMEA FX and IR strategist, Petr Krpata, adding Expect the headline news to be less GBP friendly than yesterday, when Macron meets Johnson.

 

Source : Exchange Rates.org.uk

Aug 24, 2019

 
Bank note current rate:
  currency buy sell
USD 13,775 0
AUD 9,575 0
SGD 9,875 0
CAD 10,600 0
GBP 18,500 0
EURO 15,650 0
SFR 14,975 0
YEN 121 0
NZD 9,150 0
   Last Updated :03 Dec 2021 - 03:24 PM
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