Rupiah Pressured by Ukraine Tensions and January Trade Deficit
Amid a political crisis in the Ukraine, the oil price has risen significantly and the US dollar is appreciating against other currencies, particularly emerging market currencies, including the Indonesian rupiah exchange rate. Besides the US dollar, demand for other safe havens (gold, yen as well as US Treasuries) also increased due to Russian presence in the Ukraine (Crimea peninsula). Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.35 percent to IDR 11,632 per US Dollar at 11:40 a.m. local Jakarta time.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.44 percent on Tuesday (04/03) to IDR 11,647 per US dollar.
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank IndonesiaBesides the aforementioned international factors, domestic factors contributed to negative market sentiments as well. On Monday (03/03), Statistics Indonesia announced that Indonesia's trade balance had slipped back into a deficit in January 2014 (USD $430 million), thus increasing pressure on the country's current account deficit, which had been at an unsustainable level during the first three quarters of 2013. Due to significantly increased minerals exports in December 2013, ahead of implementation of the ban on export of unprocessed minerals on 12 January 2014, the current account deficit eased to 1.98 percent of GDP in the fourth quarter of 2013. However, the January 2014 trade data now show that the improvement in the last month of 2013 was of temporary nature only. Since the export ban, minerals ore exports plunged over 70 percent. Renewed concern about a widening current account deficit may push the rupiah back into a depreciating trend against the US dollar in the months ahead.
Bloomberg reported today: "The yield on the 8.375 percent government bonds maturing in March 2024 fell one basis point, or 0.01 percentage point, to 8.21 percent, the lowest level since 8 November 2013, according to the Inter Dealer Market Association. The nation’s local-currency notes returned 2.1 percent this year, the best performance among 11 Asian indexes compiled by HSBC Holdings Plc."
Today, Indonesia's Finance ministry will sell 10 trillion rupiah (USD $858 million) worth of bonds in an auction, with maturities ranging from five to 30 years.
Also the stock market felt the impact of these weak market sentiments as international investors posted a net sell of USD $30.7 million worth of Indonesian stocks on Monday despite positive inflation data that showed easing inflation of 7.75 percent (year on year) in February 2014 (from 8.22 percent in January 2014). On Monday (03/03), Indonesia's benchmark stock index (Jakarta Composite Index) fell 0.78 percent to 4,584.21 points.
Jakarta Composite Index (IHSG):
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