JAKARTA: The rupiah is expected to trade within a narrow range in the near term as investors await the appointment of a new Bank Indonesia (BI) governor and details of the government's 2027 fiscal plans.
CIMB Investment Bank Bhd said the Indonesian rupiah-US dollar (USD/IDR) pair is expected to remain range-bound in the near term, although it sees scope for the rupiah to retest the 18,200 level against the US dollar.
"The larger move, however, will come with clarity over two key events - the appointment of Governor Warjiyo's successor and their policy preferences as well as clarity over fiscal plans with the tabling of ‘Anggaran Pendapatan dan Belanja Negara’ (APBN 2027), Indonesia’s state budget,” it said in a research note.
Bank Indonesia Governor Perry Warjiyo's resignation was announced on July 27, with Senior Deputy Governor Destry Damayanti automatically assuming the role of acting governor under the Bank Indonesia Law pending the appointment of a permanent successor.
Speaking to reporters on Monday, Destry urged market participants not to panic, saying the central bank would continue implementing its existing monetary and financial system stability policies while maintaining rupiah stability as its primary focus.
CIMB Investment Bank Bhd said investors would be watching the next BI governor's policy preferences, particularly on foreign exchange stability, growth-inflation trade-offs and capital fluidity, for signals of policy continuity.
It said markets had responded in a neutral or positive manner when previous successors were viewed as technocratically neutral or positive, with non-resident flows into bonds and equities generally skewing towards net inflows while rupiah volatility was relatively short-lived.
Conversely, the investment bank said markets had reacted more cautiously to appointments that prompted a reassessment of the policy outlook or institutional arrangements, adding that Perry’s departure was likely to keep sentiment cautious until a successor is named given his track record during a period of relatively orthodox monetary policy.
It also expects Bank Indonesia intervention to help smooth any renewed move towards the 18,200 level should the rupiah come under fresh pressure.
Under the Bank Indonesia Law, the President will nominate up to three candidates for the governorship, with the House of Representatives (DPR) given up to one month to approve or reject the nominee following a fit-and-proper test before the new governor is formally appointed. - Bernama
