Forecast at 15,800 in Q1 2024 – MUFG

Indonesia will elect a new president on 14 February. Economists at MUFG Bank analyze Rupiah’s outlook as the USD/IDR is trading near the highs seen in October 2023.

Political uncertainty to weigh on the Rupiah

We forecast the USD/IDR at 15,800 in Q1 2024 and 15,500 in end-2024. 

Markets are pricing for the US Fed to only cut rates in May after Fed Chair Powell pushed back on a March rate cut. Along with ongoing domestic election uncertainty, which will weigh on capital inflows, we are cautious on the USD/IDR. The BI will be in no rush to cut rates in H1 2024 or front-run the Fed in the rate cutting cycle to avoid inviting unnecessary Rupiah volatility. 

Once external pressures from US rates ease and domestic political uncertainty abates, the Rupiah is expected to regain modest strength against the US Dollar.