Stocks & Rupiah Indonesia: Pressures due to US Rate Hike & Greece
Most Asian stock markets are down on Wednesday (27/05), including Indonesia’s benchmark stock index (IHSG). The IHSG was down 0.95 percent to 5,270.22 points by 14:32 pm local Jakarta time. The poor performance of stocks across Asia today followed yesterday’s falling US stock markets. The Dow Jones, S&P 500 and Nasdaq all declined about 1 percent on US dollar strength after the release of several strong US economic data (supporting a US interest rate hike before the year-end) and heightened concerns about the debt crisis in Greece.
The greenback received renewed bullish momentum as US new home sales, durable goods and consumer confidence were strong or in line with expectation hence indicating that the US economic recovery continues. Last week Federal Reserve Chairwoman Janet Yellen emphasized that US interest rates will be raised in 2015 provided that US economic data remain positive.
US interest rates are expected to be raised gradually. Federal Reserve Vice Chairman Stanley Fischer stated yesterday that markets should not overly focus on the Federal Reserve’s first interest rate hike as it will take a couple of years before a more normal level is to be reached.
Concerns about the Greek debt situation have heightened as analysts began to speculate that the country may miss a payment to the IMF on 5 June 2015 if it fails to receive further bailout funds from its creditors. Greece and its Eurozone creditors (that want to see further reforms in the Greek economy) are still negotiating about the disbursement of the bailout funds. A Greek exit from the euro (Grexit) is still feared by markets and this would jeopardize the stability of the euro and whole Eurozone’s financial system.
Jakarta Composite Index (IHSG):
The same factors also put pressure on the Indonesian rupiah. However, it is assumed that the Indonesian central bank (Bank Indonesia) intervened to support the rupiah on today’s trading day. After having depreciated beyond IDR 13,230 per US dollar, the rupiah suddenly appreciated markedly to IDR 13,190 in early afternoon trading. By 14:32 pm local Jakarta time, the rupiah had appreciated 0.08 percent to IDR 13,210 per US dollar according to the Bloomberg Dollar Index.
However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.28 percent to IDR 13,229 per US dollar on Wednesday (27/05). Provided that Bank Indonesia indeed intervened today then we should see an appreciation in tomorrow’s JISDOR rate.
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank Indonesia