Indonesian Rupiah Declines on US Data, Domestic Data & Ukraine Tensions

Amid falling stocks and government bonds, the Indonesian rupiah exchange rate depreciated 0.45% to IDR 11,751 per US dollar according to the Bloomberg Dollar Index on Wednesday (06/08). This weak performance is caused by recent solid economic data from the USA, while tensions in the Ukraine are increasing (causing investors to prefer to invest in safe havens) after Russian President Vladimir Putin ordered a response to sanctions. Meanwhile, the euro lost ground to the US dollar after Germany posted unexpected declining factory orders.

Richard Fisher, president of the Federal Reserve’s Dallas branch, stated that the US central bank is becoming more hawkish, implying a move away from the accommodative monetary policy (quantitative easing) that has been weakening the currency, and thus makes the US dollar more attractive now.

Indonesia’s five-year bond yield rose to 7.996 percent (highest level since 26 February 2014), while the 10-year yield increased to 8.205 percent (highest level since 14 July 2014).

Earlier this week, Statistics Indonesia announced that Indonesia’s economic growth slowed to 5.12 percent (year-on-year) in the second quarter of 2014, while the country posted a trade deficit of USD $300 million in June 2014. Inflation, however, eased to 4.53 percent (year-on-year) in July 2014 from 6.70 percent in the previous month.

Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.19 percent to IDR 11,756 per US dollar on Wednesday (06/08):

| Source: Bank Indonesia

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