IDR: Rupiah Slips Ahead Of Bank Indonesia Rate Decision
Jul-21 02:27
Spot USD/IDR continues to test the psychological IDR15,000 barrier, which has provided the upper limit to price action over the past two weeks. The rate last changes hands +11 figs at IDR14,999, with topside technical focus falling on Jul 6 cycle high of IDR15,024. Meanwhile, the initial layer of support is provided by Jul 27/21 lows of IDR14,794/14,784.
- USD/IDR 1-month NDF last +13 figs at IDR15,047. A break above Jul 15 high of IDR15,190 would reaffirm that the underlying bullish bias remains. Bears need a fall through the 50-DMA/Jun 27 low at IDR14,792/14,788 to get some reprieve.
- MYR/IDR last deals at IDR3,367, little changed on the day, with bearish focus falling on the nearby Jun 27 low of IDR3,358. Below there opens the broken neckline of a double bottom pattern, which intersects with the 50-DMA around IDR3,350. Bulls look for a rebound above the IDR3,400 mark, which capped gains on the previous upswing.
- SGD/IDR last seen at IDR10,773, up 11 figs on the day. Further gains past yesterday's high of IDR10,778 would encourage bulls to target Jun 30, 2021 high of IDR10,821. Bears keep an eye on the 50-DMA/Jul 12 low at IDR10,643/10,636.
- 22 out of 36 economists in a Bloomberg survey expect Bank Indonesia to keep the 7-Day Reverse Repo Rate unchanged but the rest have pencilled in a 25bp hike. We think the Bank is more likely to stand pat this time (see our preview), as closely watched core inflation remains below the mid-point of the target range. That said, a pre-emptive rate rise cannot be ruled out and remains a hawkish risk.
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US TSY OPTIONS: TYQ2 115.00 Puts Blocked
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Latest block trade lodged at 02:46:31 London/21:46:31 NY:
- TYQ2 115.00 puts 2,500 lots blocked at 0-60, delta -40%. Looks like a buyer.
US TSYS: Cheapening As RBA Spill Over Fades
Jun-21 01:54
TYU2 sits -0-15+ at 115-23+, registering fresh session lows at writing. The move lower comes as U.S. e-mini futures and major crude benchmarks have pushed higher in Asia-Pac dealing, with meaningful macro headline flow remaining limited following the re-opening of cash Tsy markets.
- Cash Tsys have continued to bear steepen and run 6.0-7.5bp cheaper across the curve, with the richening impulse observed in core FI markets in the wake of RBA Governor Lowe’s previously outlined comments evaporating.
RBA: Minutes From June Meeting Flesh Out Discussion Re: Size Of Hike
Jun-21 01:40
The minutes from the RBA’s June meeting fleshed out the thought process behind the debate re: a 25 or 50bp hike:
- “Members considered whether an increase of 50 basis points could add to the community's concerns that inflation was likely to stay high. While this was a risk, the Bank could communicate that inflation was expected to return to the target over time and that the Board was committed to this objective.”
- “The argument for an increase of 25 basis points was that a sequence of 25 basis point moves represented a steady approach to withdrawing monetary policy stimulus and that this was appropriate in an uncertain environment. Members observed that if the cash rate were to be increased by 25 basis points at each meeting over the remainder of 2022, the cash rate would be 2.1 per cent by the end of the year. In a historical context, this would be quite a rapid tightening. While some central banks had been increasing policy rates in 50 basis points increments, these central banks meet less frequently than the Reserve Bank Board. Members also noted that, over the preceding couple of decades, increases in the cash rate had typically occurred in 25 basis point increments. The previous instance of the Board having increased the cash rate by 50 basis points was in February 2000.”
- “Members also considered the evolving risks to household consumption, including how households would adjust their spending in response to higher prices and interest rates, and the impact of higher interest rates on the housing market. Housing prices had declined in some markets over preceding months, but remained more than 25 per cent higher than prior to the pandemic, thereby supporting household wealth and spending. Further, many households had built up large financial buffers during the pandemic and the household saving rate was very high. The central scenario, which was conditioned on the assumption of further rate rises, was for strong household consumption growth over the remainder of the year.”
- “Given the current inflation pressures in the economy and the still very low level of interest rates, on balance, members agreed to a 50 basis point adjustment in the cash rate target. Members also agreed that further steps would need to be taken to normalise monetary conditions in Australia over the months ahead. The size and timing of future interest rate increases will continue to be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market, including the risks to the outlook. The Board remains committed to doing what is necessary to ensure that inflation in Australia returns to the target over time.”
