Jokowi-Kalla Effect: Indonesian Rupiah and Stocks Plunge after Earlier Gains
After a promising start of the day, the rupiah exchange rate and Indonesian stocks lost all of their earlier gains ahead of closing on Monday day (19/05). Around 10:00 local Jakarta time, the rupiah rate appreciated more than 0.60 percent to IDR 11,346 per US dollar on speculation that Jusuf Kalla would be nominated as Joko "Jokowi" Widodo's running mate in the presidential election (9 July 2014), backed by a coalition consisting of the PDI-P, NasDem, PKB and Hanura. After the official declaration, however, the currency lost all of its earlier gains.
Just after noon local Jakarta time on Monday (19/05), Jokowi officially announced that Jusuf Kalla will be his running mate in the election. The market was optimistic about this choice as both men are expected to bring good governance (including less fuel subsidies and more public infrastructure investments) to Southeast Asia's largest economy. Moreover, as both men enjoy widespread popularity, the official declaration of the pair also brings a high degree of political certainty to Indonesia. According to recent surveys, the Jokowi-Kalla pair will win the election by a large margin.
However, after the official declaration, the market quickly engaged in profit taking. The rupiah had depreciated 0.04 percent to IDR 11,418 per US dollar by 15:00 local Jakarta time (from the previous closing rate) based on the Bloomberg Dollar Index. Meanwhile, Indonesia's benchmark stock index (IHSG), which had surged more than one percent in the morning (before the declaration of Kalla as vice-presidential candidate), had tumbled -0.63 percent (from Friday's closing) to 4,999.64 by the same time.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.56 percent to IDR 11,351 against the US dollar on Monday (19/05) but still needs to absorb the most recent political developments.
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank IndonesiaBahas
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