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Rupiah and Jakarta stocks lag after Bank Indonesia governor resigns early
Brown Brothers Harriman says the resignation comes despite concerns over BI independence, but argues the currency’s downside is constrained by strong growth-inflation and ample FX reserves.
Brown Brothers Harriman’s Elias Haddad said the Indonesian rupiah and the Jakarta stock price index underperformed after Bank Indonesia Governor Perry Warjiyo unexpectedly resigned two years before the end of his second five-year term, with the change attributed to unspecified personal reasons.
Haddad said the early exit has added scrutiny to the central bank’s independence and has raised concerns about potential political interference.
Even so, the note argued the rupiah’s downside is limited, citing what it described as a supportive growth-inflation mix, a negligible current account deficit, manageable external debt, a fiscal backdrop that is not alarming, ample FX reserves, and that the IDR is significantly undervalued.