The USD/IDR sitting in the consolidation phase excites the market strategist of UOB Group, Quek Ser Leang. He prefers the current scenario, as it allows traders and investors to review the market’s response to the ongoing global issues.
Consolidation has primarily been adopted as an aftermath of the unprecedented economic shockwaves that occurred in 2020. The COVID-19 pandemic has left its mark on global financial markets, with rising demand for safe-haven currencies like the USD. Major economies like the US, Europe, and China have seen their economies significantly impacted by the pandemic, leading to ultra-low interest rates and a decline in GDP.
Quek Ser Leang believes that the USD/IDR consolidation phase is beneficial for investors’ risk management as it provides an opportunity to analyze the market in-depth. Investors can expect greater stability in a consolidation phase and look out for any major market shift that could affect economic performance.
According to Quek Ser Leang, the Federal Reserve’s policy change could have a substantial impact on the IDR’s value. The Reserve has announced their decision to keep the interest rates low until 2023, indicating a prolonged period of low-interest rates. This policy might lead to a loss of confidence in the USD, leading to a weaker currency and boosting the IDX’s performance.
Furthermore, the global market uncertainties, including the US-China trade war, Brexit, and the upcoming US presidential election, make the current consolidation phase an excellent opportunity to review risks adequately. Traders and investors can observe how the market responds to ongoing global events and make informed decisions about equity, bonds, and other financial instruments.
The Indonesian Central Bank’s policy has also played a vital role in the current market scenario. The central bank has reduced its benchmark interest rate on six occasions to counter the pandemic’s economic impact. This proactive policy has kept IDR stable and supported striking a balance between the demand and supply of the currency.
Looking ahead, the Chinese economy’s performance will also have a significant impact on the USD/IDR, as China is Indonesia’s largest trading partner. Continued growth in China and a successful recovery from the pandemic would undoubtedly lead to a boost in IDR’s value as demand for Indonesian goods increases.
Additionally, the ongoing dispute between the US and China might impact the Indonesian economy. The trade war has seen the US impose tariffs on Chinese goods leading to a slowdown in the Chinese economy, which indirectly affects Indonesia. A prolonged trade war between the US and China could significantly hit Indonesia’s export-dependent economy.
Overall, the current consolidation phase in the USD/IDR provides a valuable opportunity to evaluate risks while also benefiting investors’ risk management. The factors that influence the currency pair – including the Federal Reserve’s policy changes, the Chinese economy, and the current global factors leading to uncertainties – make it essential to monitor market developments closely.
In conclusion, the USD/IDR consolidation phase is an excellent opportunity for investors to review the market and make informed decisions. This consolidation has helped stabilize IDR, and the proactive policies of the Indonesian Central Bank have supported striking a balance between supply and demand, leading to a more stable market scenario. Traders should keep an eye out for factors like the US-China trade war, the ongoing pandemic, and the Federal Reserve’s policy, which will inevitably impact the currency pair’s performance.
