Indonesian Rupiah & Stocks Weakened in November as Markets Await Fed Decision amid Global Uncertainties
For Indonesia’s currency and stock markets, November 2024 was not a good month. We saw some rupiah depreciation reappearing (against the US dollar) and a falling benchmark stock index (Jakarta Composite Index, or IHSG). What this means is that market participants are nervous. And in times of nervousness, Indonesian assets are typically the first victim as participants seek safe haven assets.
Chart A shows that after a strong performance of the Indonesian rupiah in August and September 2024 (due to the Federal Reserve cutting its rates for the first time in over four years, lowering the target federal funds range by half a percentage point to 4.75–5.00 percent), the rupiah began depreciating in October 2024 amid concern whether the Federal Reserve has room to go for further monetary easing as inflation has remained stubbornly above the Federal Reserve’s target of 2.0 percent (y/y) and amid geopolitical turmoil in Eastern Europe and in the Middle East (while financial markets were also a bit nervous ahead of the US presidential election. Unfortunately this poor performance continued in November 2024.
Indeed, there was a small rebound in the rupiah rate when the Fed cut its rate, again, by 0.25 percentage points on 7 November 2024, bringing the federal funds rate to a range of 4.50–4.75 percent (its lowest level since February 2023). However, this did not last long. Starting from 11 November 2024 the rupiah reentered a period of weak trading days, weakening gradually.
And so, the rupiah depreciated from IDR 15,690 per US dollar at the end of October 2024 to IDR 15,840 per USD at the end of November 2024, a modest 0.95% decline.
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