Bias: Bullish, as SGD/IDR is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
• Rate gap: Bank Indonesia has cut interest rates to support economic growth, while the Monetary Authority of Singapore has moved towards a more accommodative stance, which could widen the interest rate differential favoring SGD.
• Risk/commodities: Recent stability in oil prices may bolster Indonesia’s trade surplus, supporting the IDR, although the currency's recent weakness amid protests raises concerns.
• Economic resilience: Singapore’s GDP is projected to grow moderately, suggesting a stable economic outlook that supports SGD strength.
Range: The pair is likely to hold near current levels within the recent 3-month range, with a tendency to test recent highs.
What could change it:
• Upside risk: A surprise tightening by the Monetary Authority of Singapore in response to unexpected inflation could strengthen SGD.
• Downside risk: Renewed domestic unrest in Indonesia leading to further IDR weakness could put downward pressure on the SGD/IDR exchange rate.
