Taiwan Urges Stronger Trade Ties With Fellow Democracies, Rejects Economic Dependence on China 
Gold and Asian Stocks Rebound as Market Volatility Eases and Global Sentiment Improves 
China Services PMI Hits Three-Month High as New Orders and Hiring Improve 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
Japan Declines Comment on BOJ’s Absence From Global Support Statement for Fed Chair Powell. Source: Asturio Cantabrio, CC BY-SA 4.0, via Wikimedia Commons 
Asian Currencies Strengthen as Indian Rupee and Australian Dollar Rally 
New York Fed President John Williams Signals Rate Hold as Economy Seen Strong in 2026 
Bank Indonesia (BI) is expected to keep its policy rate steady this week. While the first-quarter GDP growth came in slightly disappointing, there are enough data to suggest stronger growth momentum in 2H17. There is less pressure for the central bank to cut rates now, although the central bank may continue to use verbal suasion on commercial banks to trim its lending rates further, DBS Bank reported.
A look at BI’s foreign reserves provides some hints into the rate trajectory going forward. Official reserve assets rose to a record-high USD125 billion as of May. Given that the USD/IDR has been relatively stable in the year-to-date, the surge in reserves suggests that the central bank has been active in preventing the excessive strengthening of the rupiah. The BI is cautious of a possible reversal of capital flows later in the year, and thus, the need to build its reserves right now.
Nonetheless, the central bank is tolerant of gradual trade-weighted currency appreciation, even if the rupiah is relatively stable against the USD. As of April, the rupiah nominal effective exchange rate (NEER) is up by 3.5 percent since end-2015, making it one of the top performers in the region. Raising the key 7-day reverse repo rate later this year may be necessary if the Fed sticks with its plan to normalise interest rates in 2017 and 2018.
