Indonesia's central bank likely to ease further

In Indonesia, the base effects of inflation and off late currency stability might push the central bank to ease further. The currency is better than MYR on a toal return basis, in-spite of having vulnerabilities.

The currency shorting costs high, besides this policy making has been more pro-active in supporting the growth and curbing the FX volatility.

"One 25bp cut in November and another in Q1 16. Although the IDR typically reacts negatively to rate cuts, we think that, with GDP having slid to a six-year low, the effect this time may not be overly negative given that policy easing could help support local market sentiment and inflows", says Barclays in a research note. 

In order to encourage repatriation of assets held offshore, the goverment is in discussion to offer a tax amnesty. USD liquidity could be temporarily lifted up by the recent measures taken by the goverment to step up FX forward intervention. 

"It will also reduce the IDR's sensitivity to market risk aversion, albeit the intervention might not be sustained for long given the low level of FX reserves. Nonetheless, medium-term headwinds of a relatively weak current account deficit and vulnerability to risk aversion remain in place", added Barclays.