In its recent client note, Goldman Sachs analysts believe USD/IDR is likely to reach its three-month forecast of 14,800 in the coming days.
Key quotes
"In early June, we argued that, after rapid rupiah appreciation versus the dollar, the pace of IDR outperformance could slow.
Since then, the IDR has depreciated versus the Dollar while other Asian currencies have been more resilient.
Against this backdrop of underperformance, the announcement that Bank Indonesia would purchase large amounts of zero interest bonds with the stated intention of helping to shoulder the country's fiscal burden was unexpected.
Much will depend on how inflation evolves in the months ahead and how this tool will be used.
If the BI can convince markets that it will sterilize its liquidity injection appropriately and that this unusual central bank purchase is a one-off, then we think any IDR sell-off should be limited.
If, however, investors see the potential for this tool to be used in more normal times, the IDR could begin to reflect risks from a loss of confidence in policy, and an increase in inflation expectations.
An adverse market reaction could see USD/IDR moving towards our 3-month forecast of IDR14800 in more a more front-loaded fashion."
Reprinted from fxstreet，the copyright all reserved by the original author.
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