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Riku Tanaka
April 14 17:29

USD/IDR: Indonesian Rupiah teeters on month’s best as response to Bank Indonesia's status quo

Governor Warjiyo made it clear that currently there is still some room for additional rate cuts.
Indonesia's national bank, Bank Indonesia (BI), held its April fiscal policy meeting on Tuesday (Apr 14), where it was decided to keep the 7-day reverse repo rate unchanged at 4.50%, in accordance with predictions.

The national bank made the decision to keep the rate unaltered after two consecutive rate cuts, as it hopes to survey the effect of these cuts have on the economy as the nation continues fighting the COVID-19 epidemic.
Governor Warjiyo made it clear that currently there is still some room for additional rate cuts.

Key points
1.       Liquidity is more than sufficient in nation’s banking framework.
2.       The COVID-19 pandemic will debilitate demand for loans.
3.       The decision to maintain rate was dependent on the necessity to maintain stability.
4.       Officials will build upon fervor of 'triple intervention' to maintain rupiah’s strength.
5.       Government plans to develop liquidity through 'quantitative easing'.
6.       Government will cuts reserve prerequisite proportions.
7.       The reserve requirement ratio cut will disseminate 102 trillion rupiah to budgetary framework.
8.       RRR is to be cut by 200 bps for traditional banks, 50 bps for Islamic banks.
9.       The changes to rules on macroprudential intermediation ratio for Islamic banks will free up 15.8 trillion rupiah to market.
10.   The new RRR will come into effect May 1st.
11.   Central bank loosens up rules on late installment of bank charge cards.
12.   The BI’s fiscal policy stance is lax.
13.   The available room for rate cut was not used, considering market instability.
14.   Government orders banks to meet the new macroprudential liquidity buffer ratio by purchasing government bonds in primary market.
FOREX implication
The Indonesian Rupiah (IDR) receives a fresh surge of offers against its American peer, following the Indonesian national bank's decision to maintain rate, knocking-off the USD/IDR pair back to test the four-week low of 15.630, where it currently lingers.