Indonesia’s currency may weaken as new Government seeks growth: ANZ

JAKARTA – Following the announcement by Indonesia’s General Elections Commission (KPU) that Joko Widodo (Jokowi) has won the Presidential election, with 53.15% support vs 46.85% for Prabowo Subianto, ANZ Bank is suggesting near-term downside potential for USD/IDR, but expects the pair to rebound further out. 

 “We think reforms will take time to be put in place, with Jokowi now saying that fuel subsidy rationalisation will take place in the next three years,” ANZ says. “Meanwhile, the current account deficit will weigh on the currency as the new Government seeks to boost growth to 7% in two years. We see a potential increase in USD hedging needs.”
Commenting on Prabowo’s decision to contest the election results in Indonesia’s Constitutional Court (which could take up to August 24 to make a ruling), ANZ says: “We do not see merit in his contest.”  www.live.anz.com (ATI).