- The ‘Fed pivot’ sentiment appears to be on strong foot, given the US inflation number that continue to weaken. However, still-ample liquidity in the US private sector compel the Fed to continue its tightening campaign via QT.
- The weakening USD and inflows to the domestic bond market explain the IDR’s ongoing rally. But such a rally could be snapped ahead of the FOMC meeting in early February as the Fed may look to continue tightening its policy.
- The DHE regulation may help to stabilise the IDR’s value by improving FX liquidity conditions in the domestic economy and strengthening BI’s monetary authority. Emerging economies’ concerted move to restrict capital mobility limit the regulation’s detrimental impact on Indonesia’s FDI attractiveness.
