Indonesian Stocks & Rupiah Strengthen after US Rate Hike
Indonesian stocks and the rupiah responded highly positive to the decision of the US Federal Reserve to raise its key Fed Fund Rate by 25 basis points on Wednesday (16/12). Indonesia's benchmark stock index (Jakarta Composite Index) soared 1.62 percent to 4,555.96 points, while the rupiah appreciated 0.44 percent to IDR 14,009 per US dollar. Not only in Indonesia but also globally stocks thrived on the ending of prolonged uncertainty about the timing of the US interest rate hike.
After the US central bank ended the quantitative easing program last year, there has been severe market volatility in 2015 due to uncertainty about the US rate hike (as well as China's economic slowdown). However, over the past weeks markets had become increasingly convinced that the Fed Fund Rate would be raised from the historic low of 0.00-0.25 percent (the level it had been since 2008) in the last policy meeting of 2015. Therefore, the Federal Reserve acted in line with market expectations causing a sigh of relief. Moreover, the rate hike implies that the US economy is back on track (the USA is a key export market for Asian countries). The Federal Reserve further stated that future rate hikes will be gradual and gently.
Jakarta Composite Index (IHSG):
Generally, the US dollar strengthened after the rate hike announcement. The rupiah, however, appreciated against the US dollar. Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.16 percent to IDR 14,028 per US dollar on Thursday (17/12). Meanwhile, Indonesian bonds advanced, pushing the ten-year yield down the most in two months.
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank Indonesia