Indonesia's Stocks & Rupiah Influenced by Hawkish Fed & Lower Oil Price
Most Asian stocks slid on Monday (22/08) as there occurred renewed speculation about a Fed Funds Rate hike in September 2016 after hawkish statements from Federal Reserve officials, while crude oil prices fell nearly 2 percent in Asian trade after Iraq indicated that it seeks to boost exports, hence effectively snapping a seven-day winning streak. However, Indonesia's benchmark Jakarta Composite Index (IHSG) was up 0.21 percent to 5,427.17 points on the first trading day of the new week.
Renewed speculation about a September US interest rate hike stems from Fed Vice Chairman Stanley Fischer's statements saying the US job market is currently close to full strength. Moreover, one week earlier, New York Fed President William Dudley said a September rate hike is a possibility. Monetary tightening in the world's largest economy causes funds to flow from the more risky, yet higher-yielding emerging market assets back to the USA.
Investors will be eager to search for new clues about the looming US interest rate in the content of a speech that will be delivered by Fed Chair Janet Yellen in Jackson Hole (Wyoming) where global policy makers will meet later this week for an annual meeting.
Crude oil plunged 1.7 percent on Monday after having climbed almost USD $10 per barrel since the start of August. Previously, oil climbed on the back of speculation that members of the Organization of the Petroleum Exporting Countries (OPEC) are to agree on a production freeze deal with non-OPEC producers led by Russia. Today, however, oil fell as Iraq signaled it is to boost crude oil exports.
Foreign Net Buying/Selling on the Indonesia Stock Exchange:
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| Foreign Net Buying/Selling (in IDR trillion) |
+20.98 | +24.29 | +15.88 | -20.65 | +42.60 | -22.59 | +39.34¹ |
¹ per 19 August 2016
Source: Indonesia Stock Exchange
The strong US dollar - supported by the hawkish Fed statements - managed to cause weakening emerging market currencies on Monday. The Indonesian rupiah was in red territory from the start of trading today. Based on the Bloomberg Dollar Index, Indonesia's currency slid 0.48 percent to IDR 13,226 per US dollar. Meanwhile, Bank Indonesia's benchmark rupiah rate (the Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.59 percent to IDR 13,197 per US dollar on Monday (22/08).
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank Indonesia