Indonesian Rupiah Exchange Update: Depreciating on Strong US Dollar

Economic data from the US and Eurozone make investors turn to less risky assets, particularly the US dollar. Gross domestic product (GDP) growth in the USA in the second half of 2014 rose to 4.2 percent and July sales of houses increased 3.3 percent, 0.6 percent higher than forecasted. Furthermore, the ongoing crisis in Ukraine - which is in fact escalating - continues to affect global currencies, particularly those of the emerging markets, including Indonesia.

The Eurozone’s inflation continued to fall in August 2014 (to 0.3 percent) while unemployment is near record levels (11.5 percent). This reinforces expectation that the European Central Bank (ECB) will decide to take stronger action to avert a downward price spiral. Monetary easing in the Eurozone is expected to weaken the Euro and boost the US dollar.

Meanwhile, domestic economic data were positive. Indonesia posted a USD $123.7 million trade surplus in July 2014, while inflation eased to 3.99 percent (year-on-year) in August 2014. The country’s manufacturing activity, however, slowed.

Indonesia's July trade surplus managed to limit the decline of the rupiah during today’s trading day.

Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.06 percent to IDR 11,710 per US dollar on Monday (01/09).

| Source: Bank Indonesia

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