USD/IDR: Indonesia rupiah pressured as exports and imports slump

The USD/IDR exchange rate drifted upwards on Monday after Indonesia published another set of weak trade numbers. The pair jumped to 15,000, a few points above last Friday’s low of 14,928.

Indonesia exports slump

Indonesia has been one of the top growing economies in the past few months. The country has benefited from the growing discomfort among China’s manufacturers as tensions with the US jump.

As a result, more companies are diversifying their operations in Indonesia, pushing foreign direct investments (FDI) to a record high. FDI flows jumped by 20.2% in the first-quarter to over $11.87 billion. Most of these funds came from Singapore and Hong Kong.

The economy expanded by 5.03% in the first-quarter, higher than what analysts were expecting. However, a key challenge for the economy is that exports are falling. 

Data by the country’s statistics agency showed that the export growth slumped by 21.18% in June, worse than the expected decline of 18%. Exports have dropped in the past three straight months.

Import growth also declined, signaling that Indonesia’s demand was easing. The country’s imports dropped by 18.3% in June after rising by over 14% in the previous month. Imports have fallen in all but one month this year. As a result, the country’s trade surplus came in at over $3.46 billion.

Therefore, there are growing signs that the Indonesian central bank will start cutting interest rates in the coming months, as I wrote here. The bank left rates unchanged at 5.75% in its June meeting since inflation has fallen to its target. It has left rates intact in the past five straight months.

Another important news was that India and Indonesia are in talks to use a common currency for cross-border trade.

USD/IDR forecast

USDIDR chart by TradingView

The USD/IDR price has been in a strong bullish trend after falling to a low of 14,608 in May this year. It jumped to a high of 15,221 this month and then suffered a harsh reversal to about 15,000. On the daily chart, the pair was trading at the 50-day and 25-day moving averages (MA). It is also slightly above the key support level at 14,847, the lowest level on February 2nd.

Therefore, the pair will likely resume the uptrend after the weak Indonesia data. If this happens, the next level to watch will be at 15,221, the highest point this month.