Michael Wan at MUFG stresses that local factors matter for Asia FX, focusing on current account deficit currencies reliant on external funding. For Indonesia, he highlights a major corruption investigation involving electric motorcycles and a free meal programme, and argues that without clear fiscal discipline, MUFG remains cautious on the Indonesian Rupiah despite the broader regional growth story.

Local risks weigh on Indonesian Rupiah

“Of course, not all things are global in nature and there are also local drivers of currencies, and most pertinently for the current account deficit currencies in our region which are dependent on external funding. In Indonesia in particular latest news suggests that the Attorney-General Office (AGO) has begun seizing thousands of electric motorcycles procured by the National Nutrition Agency (BGN) as part of a massive corruption investigation linked to the government’s free nutritious meal programme.”

“The key for markets and the Indonesian Rupiah beyond the political noise is whether this will result in more fiscal discipline by the Indonesia government both directly on budget and also off-budget indirectly through below the line item spending and also contingent liabilities. For now we are not that sanguine that it will fundamentally change the nature of spending programs and as such remain cautious on IDR, but this would be key to monitor moving forward.”

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