Indonesian Rupiah: Policy continuity offsets but cannot erase external headwinds – OCBC

Christopher Wong of OCBC highlights that Indonesia's selection of Finance Minister Suahasil Nazara indicates fiscal stability and caution, thereby decreasing domestic risk premiums for the Rupiah. Wong clarifies that USD/IDR remains limited by soaring US yields, soaring oil prices, and the forthcoming BI meeting, with expected sideways trading near key moving-average-based support and resistance levels.

The new Finance Minister Suahasil Nazara reinforced the policy continuity during his first press conference, maintaining the fiscal deficit projection at 2.85% of GDP and stressing the deficit would stay within the 3% statutory limit. The January-August deficit amounted to a relatively moderate 0.93% of GDP. The government will retain a minimum of IDR200tn in state-owned banks until July 2027, with any subsequent reduction being communicated judiciously to prevent financial instability.

While this appointment signals a renewed focus on fiscal discipline and reduces some domestic policy risk, the immediate FX outlook remains heavily dependent on external factors. High US Treasury yields and ongoing elevated oil prices remain constraints, with the upcoming BI meeting also being closely watched for its impact on FX stability.

A more sustained IDR recovery would likely require easing US rates and oil prices, alongside continued foreign demand for Indonesian assets. The daily chart shows mild bullish momentum, but there are tentative signs of moderation in the recent rise of the RSI. Range-bound trading is not entirely dismissed, with support at 17677 (21 DMA), 17620 (38.2% fibo retracement of 2026 low to high) and 17500 levels.