Asia week ahead: Indonesian rate call and key data on Korea, Singapore, Taiwan
The desk anticipates Bank Indonesia will raise interest rates by 25 basis points to 6.0% in an effort to maintain currency stability amidst rising inflation risks driven by higher oil prices. Per the full note from ING, this move aligns with the central bank's ongoing strategy to bolster foreign investment through attractive yields, particularly as the Indonesian rupiah faces increased pressure. Meanwhile, South Korea's second-quarter GDP data is expected to show moderated growth of 1.0% quarter-on-quarter but a robust year-on-year increase of 4.2%, reflecting improved net exports. This backdrop underscores the dynamics of the Asian currency markets ahead of key indicators next week.
What the desk is arguing
The Bank Indonesia's potential 25 basis points hike is a proactive measure to counter vulnerabilities within the rupiah and appears necessary amidst inflationary pressures. The recent surge in global oil prices highlights the need for enhanced policy credibility to foster foreign capital inflows, as detailed in ING's commentary.
Despite inflation being relatively contained, the risks pose significant threats to Indonesia's external balance positions, thereby driving the central bank's decision to adjust interest rates, targeting 6.0%. The desk notes that South Korea's GDP data will also influence regional sentiment, predicting a positive impact from net exports and fiscal support on the economy.
Where it sits in our coverage
Our current consensus target range for the USD/IDR is situated between 1.04 and 1.12, with the following firm targets: - jpmorgan: 1.10, Mar-26 - bofa: 1.04, Mar-26 - citi: 1.08, Mar-26
The desk’s projection closely aligns with jpmorgan’s outlook at 1.10, suggesting an optimistic view toward the currency amid the anticipated rate hike. This positions us towards the upper end of the consensus range, indicative of a strengthening bias for the rupiah post-decision.
How other firms see it
Firms aligned with the anticipated hike include jpmorgan, emphasizing a confidence in the Indonesian economy, while bofa presents a contrary stance that suggests a more cautious approach given external headwinds. This divergence reflects differing views on the effectiveness of recent fiscal measures and inflation management.
Key indicators to monitor include USD/IDR behavior, reflecting post-rate decision adjustments, as well as South Korean GDP data’s impact on regional sentiment surrounding the KRW. These interconnected dynamics will be critical as we approach upcoming economic releases.
What the calendar says
No significant economic events are scheduled in the upcoming week that could impact Indonesia or its currency dynamics directly. The focus remains firmly on the monetary policy meeting outcomes and associated forward guidance from Bank Indonesia.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Bank Indonesia likely to raise rates to 6.0% for currency stability.
- 02South Korea's GDP data to show moderate growth driven by net exports.
- 03Regional currencies sensitive to oil price fluctuations.
- 04Upcoming decisions may influence risk sentiment broadly across Asian currencies.
Market implications
Watch for potential volatility in USD/IDR around the rate decision, particularly if the outcome deviates from the expected 25 basis point hike. The market reaction could also hinge on South Korea's GDP data release, which may shift sentiment across the region.
Risks to this view
The primary risk to this projection centers on an unexpected decision by Bank Indonesia to maintain rates, which could destabilize confidence in the rupiah. Similarly, any negative surprises in South Korean GDP figures could dampen broader regional economic sentiment.
Articles Asia week ahead: Indonesian rate call and key data on Korea, Singapore, Taiwan Published 04:13 Asia week ahead China Indonesia Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Indonesia’s interest rate decision and South Korea's second-quarter GDP are the highlights of the week. Key data includes Singaporean inflation and Taiwanese export orders. China will mull changes to loan prime rates Deepali Bhargava and Lynn Song Asia Research highlights of the week China slowdown worse than expected on weak domestic demand China’s trade grows at the fastest pace since 2021 Asia FX Talking: Large export flows yet to help North Asian FX A prescription for power – China’s biotech boom and the new global pharma order Indonesia: BI to raise rates 25bps aimed FX stability We expect Bank Indonesia to hike rates by 25bps to 6.0% on Wednesday, reflecting its continued focus on FX stability.
Higher policy rates and attractive Sekuritas Rupiah Bank Indonesia (SRBI) yields are aimed at attracting foreign inflows, especially as the rupiah remains vulnerable. While inflation remains contained, the recent rise in oil prices revived concerns over Indonesia's external balances. It underscores the need for clear and credible policy action to support the currency.
South Korea: Net exports drive second-quarter GDP South Korea releases second-quarter GDP data on Thursday. We expect GDP to moderate to 1.0% quarter-on-quarter, but year-on-year growth should accelerate to 4.2%. Net exports are likely to contribute positively to overall activity.
The sharp improvement in the terms of trade will eventually play a positive role in the domestic economy. Thanks to fiscal support, private consumption is expected to expand modestly. Singapore: Inflation expected to firm in June We expect Singapore’s headline and core CPI inflation to firm in June.
Higher global energy and food prices are likely to pass through to domestic costs. Rising demand for AI-related infrastructure and digital services, meanwhile, should place additional upward pressure on prices. Taiwan: Strong export orders, IP amid tech boom Taiwan releases export orders data on Tuesday.
We look for orders to remain strong but to moderate a bit to 43.9% YoY in June. Two categories, Electronic Products and Information and Communication Products, account for the bulk of export orders. We expect industrial production data to show an acceleration to 15.2% YoY.
Both data points hinge on the health of Taiwan’s tech exports. China: No change in LPR expected It’s a quiet week ahead for China in terms of macro news, after the most recent data showed China’s growth notably decelerating in the second quarter. On Monday, we expect China to announce no change in its loan prime rates.
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