Asia FI & FX Strategy Viewpoint: Trading IDR ahead of the hike

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Asia FI & FX Strategy Viewpoint: Trading IDR ahead of the hike

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Asia FI & FX Strategy Viewpoint

Trading IDR ahead of the hike

Hike in May and aiming for IDR weakness to go away 14 May 2026

We expect BI to deliver a hawkish policy rate hike by 25bps on 20th May, having flagged GEM FI & FX Strategy

rising risks in recent weeks (see report). This would send a stronger signal of BI’s Asia

commitment towards anchoring IDR stability. We think that further rate hikes remain Claudio Piron

possible, particularly if IDR weakness persists and/or upside inflation risks materialize Emerging Asia FI/FX Strategist

amid building pipeline pressures. However, we don’t expect the tightening cycle to be as Merrill+65 6678Lynch0401(Singapore)

aggressive as in past episodes, given that BI’s policy toolkit is now broader, alongside a claudio.piron@bofa.com

greater emphasis on strengthening coordination with fiscal policy (see report). Kai Wei Ang

ASEAN Economist

More constraints on intensifying current set of measures Merrill+65 6678Lynch5518(Singapore)

kaiwei.ang@bofa.com

SRBI-policy rate spread is far wider than in the past, and BI is probably mindful of the

risks of excessive liquidity tightening. While IndoNIA remains within the lower half of the AbhayEmergingGuptaAsia FI/FX Strategist

interest rate corridor, it has shifted closer to the mid-point since late April. Meanwhile, Merrill Lynch (Singapore)

+65 6678 0427

after higher-than-usual drawdowns of FX reserves over the past months, BI seems to be abhay.gupta2@bofa.com

taking a more calibrated approach towards its FX intervention. On 12th May, BI indicated Rahul Bajoria

that it would pursue “smart” intervention as it maintains its presence in the markets. India & ASEAN Economist BofAS India

rahul.bajoria@bofa.com