USD/IDR: Rupiah to see only a mild depreciation episode in 2022 – ING

The Indonesian rupiah (IDR) is set to move only slightly downward over coming months despite the Federal Reserve rate hike cycle, economists at ING report.

Possibly higher rates and a surprisingly resilient currency

“We believe that rising inflation and a round of tightening from the central bank will be enough to nudge long-end rates to peak at roughly 7.05%, especially with the US Federal Reserve taking on a more pronounced hawkish tilt.”

“IDR will likely face some depreciation pressure in the coming months given the possible financial market outflow related to the Fed rate hike cycle. However, we have noted a relatively more resilient currency with IDR benefiting from positive export dynamics as higher global commodity prices translate to higher export earnings.”

“We are likely to see only a mild depreciation episode for IDR in 2022, especially if Bank Indonesia pushes ahead with a modest tightening cycle of its own.”