There was less
volatility in the Rupiah in 2016 than in 2015. Indeed if we ignore the rapid
rise in the dollar post US election, the Rupiah performed reasonably well
except in April.
That might change. Given what we have said about the
country, what is in store for the currency and does the risk of major global
financial/ currency issues in 2019/20 have an impact or will the Rupiah remain
relatively immune?
2017
January and February 2017 might see some short term threats
but we are more interested in the medium and longer term. There is a lot going
on, there may be sudden rate changes ( rates are at an all time low) but there
is an attempt to control volatility. Although
at the time of writing the rates were maintained in January.
Despite some underlying long term signs of weakness, March to May is a time when investors are
likely to feel positive about the currency. Despite the attempts to manage the
level of exchange flows, there is a good chance that there will be enough
buying to create noticeable rises.
June to August continues this theme although there could be
a turning point around June. Although there are continued attempts to maintain
the currency at a stable level there may still be rises in value.
Also at this time there is a change in the wider interest
rate environment that will have a long term impact
September and October continue the positive theme of the
year indeed the position looks very positive now.
December is moderated slightly due to wider financial
environment changes but there is still a lot of momentum to buy. November is
particularly noteworthy.
However the year end is somewhat more tricky and investment
flows may be distorting at this time. I don’t really see falls though
January and February 2018, while still seeing some of the
conditions that contributed to a positive trend, may see a drop off in
enthusiasm by investors, less buying and even some falls in value.
March to May continues this mood, and now there may be a
great deal of confusion about direction for the currency. There are still some
positive sentiments but on balance the uncertain environment will probably keep
values in check. There is some chance of
inflationary conditions which may cause appreciation but may also lead to
significant management by the government.
July and August are similar in tone. There may be small
interest rate changes to adjust to the environment.
It is difficult to read the trend now- but should definitely
be a clear trend, it isn’t a quiet time nor a particularly volatile one.
September and October are more moderate in tine. There is
still a broadly positive mood, but it is much reduced by interest rate
adjustments and longer term underlying concerns.
December is another difficult month to call. There are still
restrictions to manage the currency which will hold the value down, but there
are also forces that suggest it could continue to rise.
2019
January and February 2019 are rather more difficult months.
As a result it is unlikely that the currency will rise. It may fall but there
is still support- probably it will be a volatile period.
March to June continues the theme. But now there is a return
to the potentially inflationary conditions of early 2018, which could mean big
rises or big increase in money supply ( inflation). There is still support- and
the most likely outcome is more volatility.
July to September continues the inflationary indicators (
increase in value or money supply)- there is added instability now as investors
try to decide what to do. Expect all movements to be accentuated now.
October and November are rather quieter, There is still some
volatility but a combination of support and active management through rates
makes the currency more attractive.
December basically sees this continue, though the conditions
might be more mixed. Rate adjustments might have a negative effect. There is
still a tendency to overdo the trades in both directions.
2020
The potentially “inflationary” conditions continue and there
is still a tendency to overdue the direction of movement. More interest rate
adjustments are likely.
March to July is much the same but there is less direction
and more volatility now. There may also be some periods when trade is severely
reduced as investors play a wait and see game.
August and September are similar to January and February in
many ways. But there is a sense of low key uncertainty now that means that it
is difficult to find a stable value for the currency.
October and November continue this with yet more volatility
but seeming to go nowhere overall.
December is a relatively quiet month- there is still some
volatility but it is vastly reduced and the period is moderate but still
lacking real direction.
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