Indonesian Rupiah Exchange Rate Update: Stronger on Falling Oil Prices

Oil prices fell as concerns about a disruption in oil supplies from Iraq have been waning. This is good news for countries that import large quantities of oil (such as Indonesia).

Market participants will also be interested to learn several Indonesian macroeconomic data which will be released on Tuesday (01/07) by Statistics Indonesia. These data include June inflation and the May trade data. Inflation is expected to ease below 7 percent (year-on-year) from 7.32 percent (yoy) in May 2014. Forecasts for the May trade balance are less unified. The Indonesian government and central bank expect a slight surplus (due to improved crude palm oil exports) but several analysts argue that the balance may record a slight deficit in May. The trade balance is an important statistic for investors as Indonesia has been coping with a large current account deficit. In the first quarter of 2014, the country’s current account deficit was 2.06 of gross domestic product (GDP). Recently the Governor of Bank Indonesia, Agus Martowardojo, stated that this deficit will widen in the second quarter.

The rupiah has started to weaken since the country posted an USD $1.96 billion trade deficit in April 2014 in combination with the falling lead of presidential candidate Joko Widodo (Jokowi) on his rival Prabowo Subianto (according to most Indonesian popularity surveys). On 9 July the Indonesian people will vote for their next leader.

Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 1.11 percent to IDR 11,969 against the US dollar on Monday (30/06).

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

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