AUD/IDR Outlook: The Australian dollar is likely to increase as it is currently trading significantly above its recent average and near its 90-day highs, supported by rising commodity prices and expectations of a rate hike from the Reserve Bank of Australia.
Key drivers:
• Rate gap: The Reserve Bank of Australia is expected to act hawkishly in response to rising inflation, while Bank Indonesia is intervening to support the rupiah amidst its recent depreciation.
• Risk/commodities: Rising commodity prices, particularly in iron ore, are helping to strengthen the Aussie and attract foreign investment.
• Macro factor: Australia’s latest producer price index points to continued inflationary pressures, reinforcing potential RBA rate hikes.
Range: The AUD/IDR is likely to test the upper extremes of its recent 3-month range as momentum remains strong.
What could change it:
• Upside risk: A surprise increase in commodity prices could further boost the AUD.
• Downside risk: A significant downturn in global risk appetite may lead to a correction in the AUD’s recent gains.