Rupiah Strength Nearing An End

We hold a moderately bearish view on the Indonesian rupiah in the near term. The unit has been edging stronger in recent weeks to a multi-year high of IDR8,505/US$. While we cannot rule out further gains as the growth story remains intact and foreign inflows are still strong, we believe the odds favour weakness as global commodity prices come under pressure and moderating inflation reduces the need for Bank Indonesia (BI) to tighten policy.

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