Indonesian Rupiah weakens as MSCI considers downgrading Indonesia to standalone status
US Treasury's Erin Browne urged the IMF to address global imbalances and warned that volatile currency moves risk market stability.
USD/IDR holds gains after opening at a bullish gap, trading around 18,090 during Asian hours on Friday. The currency pair strengthened as the Indonesian Rupiah (IDR) came under pressure following an announcement from MSCI. The index provider stated that it is considering downgrading Indonesia from emerging-market status to a standalone market, citing persistent concerns over market investability and governance. This consultation comes after an initial warning issued in June, where MSCI cautioned that Indonesia could face reclassification if accessibility issues were not addressed, according to Reuters.
In response to the potential downgrade, Bank Indonesia reaffirmed its commitment to maintaining an active market presence to safeguard the stability of the Rupiah. The central bank pledged to continue consistent interventions across offshore non-deliverable forwards (NDF), domestic NDF, spot markets, and secondary market government bond purchases. Simultaneously, the Indonesia Stock Exchange announced plans to engage directly with MSCI to address their concerns, stating it will provide stronger evidence of structural market reforms.
The upside of the USD/IDR pair is restricted as the US Dollar (USD) declines following recent comments from key financial leaders. Speaking at a fireside chat with International Monetary Fund (IMF) Managing Director Kristalina Georgieva in Bangkok, US Federal Reserve (Fed) Chairman Kevin Warsh reiterated the Fed’s commitment to price stability while refusing to prejudge upcoming policy meetings. Warsh highlighted that an investment surge is currently the most significant upside force in the global economy.
Meanwhile, US Treasury Undersecretary for International Affairs, Erin Browne, called on the IMF to take a more assertive approach to identifying global imbalances and urged a balanced outlook considering positive US-led economic shocks. She further cautioned that sharp, disorderly currency moves could trigger volatility across broader financial markets.
Fed seen waiting until December as TD trims PCE forecasts on softer PPI
According to TD Securities, the latest inflation signals from producer prices have prompted a modest downward revision to their personal consumption expenditures outlook. The bank notes that "PCE-relevant components of PPI were on net weaker than we had expected, resulting in a lower forecast," and now looks for "core PCE for September to print at 0.32% m/m with the headline at 0.49%." TD stresses that this pace of inflation is "still uncomfortably high for the Fed," but adds that it "believes it prefers to wait until December for another hike."
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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