After six years of steady decline, the Indonesian rupiah is likely to have appreciated against the US dollar at the end of 2016. So far this year, the currency of Indonesia has appreciated 4.8 percent to IDR 13,126 against the greenback (Bloomberg Dollar Index) supported by capital inflows, particularly into government bonds and stocks as well as the delay in further monetary tightening in the USA. Although the rupiah should depreciate a bit as we go towards the end of the year, it is set to finish the year at a stronger level than it started.

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Contrary to the positive performance of most emerging market stocks, Indonesia's benchmark Jakarta Composite Index fell more than one percent on Monday (15/08). While other markets were supported by advances in crude oil prices and a rally in Chinese shares, Indonesian shares declined on the nation's weak trade data that were released by Indonesia's Statistics Agency today. Investors were eager to use this opportunity to engage in profit taking as the Jakarta Composite Index nearly touched a record-high level after an impressive recent rally.

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Indonesian assets made a remarkable performance on Monday (01/08). Indonesia's benchmark Jakarta Composite Index surged 2.79 percent to 5,361.58 points, while the rupiah appreciated 0.50 percent to IDR 13,047 per US dollar. Indonesian stocks - by far - outperformed their counterparts in other Asian Pacific nations. Overall, the majority of Asian stocks rose today on the back of waning expectations of another US interest rate hike in the near future.

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After being in green territory for almost the entire trading day, Indonesia's benchmark Jakarta Composite Index suddenly plunged into deep red in the last 1.5 hours of trading on Friday (29/07). HM Sampoerna, one of the largest companies on the Indonesia Stock Exchange in terms of market capitalization, shocked analysts by plunging 9.70 percent. Another huge company, Unilever Indonesia also put severe pressure on the Jakarta Composite Index by plunging 5.75 percent on Friday.

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Indonesian stocks and the rupiah performed well on the day that President Joko Widodo announced his cabinet reshuffle, while Japan announced a larger-than-expected economic stimulus package to boost the local economy. The benchmark stock index of Indonesia (Jakarta Composite Index) surged 0.96 percent to 5,274.36 points, while the Indonesian rupiah appreciated 0.29 percent to IDR 13,137 per US dollar (Bloomberg Dollar Index) on Wednesday (27/07). Lets take a closer look.

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Positive sentiments caused by the Group of 20 economies meeting in China have waned, hence most Asian stocks are lower on Tuesday (26/07). Instead, negative sentiments are caused by falling shares on Wall Street overnight as well as the declining crude oil price (touching a near three-month low). Market participants are also in 'wait and see-mode' ahead of the Federal Reserve's July two-day policy meeting (that starts later today) and the two-day policy meeting of the Bank of Japan that starts on Thursday.

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It was another impressive day at the office for the Indonesia Stock Exchange. Indonesia's benchmark Jakarta Composite Index (IHSG) surged 1.35 percent to 5,242.82 points on Wednesday (21/07). After Thailand's benchmark index, the Jakarta Composite Index was the best performing index in Asia today. Overall, Asian markets were mixed as most investors seem to reassess the global economy after the International Monetary Fund (IMF) decided to cut its global growth outlook (modestly) on Tuesday (19/07).

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The central bank of Indonesia (Bank Indonesia) announced today (14/07) that the nation's foreign exchange reserves rose by USD $6.2 billion to USD $109.8 billion in June 2016. The rise was supported by foreign exchange receipts, primarily from the issuance of government US dollar-denominated bonds, the auction of Bank Indonesia foreign exchange bills, tax revenues, oil & gas export earnings, as well as the withdrawal of foreign-denominated government loans.

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In the post-Brexit reality, stocks have been performing well, worldwide, with the exception of the week of 4 July when markets were hit by profit-taking amid heightened concern about the world's economic fundamentals. Apart from that week (when Indonesian markets were closed for a public holiday) stocks have been rallying, fueled by optimism about monetary stimulus from key central banks. So far this week, gains in worldwide stocks reappeared, fed by a positive (but not too positive) US jobs report and the prospect of more stimulus from central banks.

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The Indonesian rupiah has been rallying impressively over the past couple of days in the "post-Brexit" era. Amid severe uncertainty ahead of the Brexit referendum result, Indonesia's currency depreciated markedly on Thursday 23 June 2016. However, in the following days the rupiah started to strengthen, touching a two-month high against the US dollar (even though the US dollar has been strong as well due to the Brexit issue). Based on the Bloomberg Dollar Index the rupiah is now trading at IDR 13,175 per US dollar. What explains this recent rupiah strength?

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For most of this year, the financial media has held a generally positive tone. There have been some exceptions in cases like the Eurozone which is still mired in a deeply divided sovereign debt crisis. But for most of the world, 2015 has been a positive period in terms of general growth in their broad trends. So it might be easy for macro investors to assume that most markets are currently establishing themselves in the bullish direction.

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The Indonesian rupiah touched a 17-year low as the currency continued to depreciate amid persistent bullish US dollar momentum. The rupiah weakened to IDR 13,539 per US dollar according to the Bloomberg Dollar Index on Friday (31/07). The US Commerce Department announced on Thursday (30/07) that US gross domestic product (GDP) expanded at 2.3 percent (year-on-year) in the second quarter of 2015, giving rise to heightened expectation that the US Federal Reserve will raise its key interest rate soon.

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Companies active in the pharmaceutical industry of Indonesia need to find strategies to overcome sharp rupiah depreciation. Indonesia’s pharmaceutical industry is still - to a large extent - dependent on the import of raw materials, hence a weakening rupiah raises the costs of imports thus eroding profit margins. Since May 2013, when the US Federal Reserve started to hint at monetary tightening, the US dollar has experienced bullish momentum. Between the May 2013 and July 2015, the rupiah depreciated around 37 percent against the US dollar.

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For most of this year, the Indonesian rupiah has met selling pressure against the US Dollar. Year-to-date price activity in the USD/IDR shows a rise from below IDR 12,250 to new highs above IDR 13,330 per US dollar. For Indonesian export companies, this is great news as it means that their products will be cheaper for foreign consumers to buy. For the domestic economy, this creates a different set of implications as it also makes it less likely that foreign investors will be looking to buy into Indonesian assets.

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Since late 2011 Indonesia has been plagued by a structural current account deficit (CAD) that has worried both policymakers and (foreign) investors. Despite Indonesian authorities having implemented policy reforms and economic adjustments in recent years, the country’s CAD remains little-changed in 2015. The World Bank and Bank Indonesia both expect the CAD to persist at slightly below 3 percent of the nation’s gross domestic product (GDP) in 2015, alarmingly close to the boundary that separates a sustainable from an unsustainable deficit.

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When we look at the long-term activity in the Indonesian rupiah, we have seen a surprising level of strength when viewing the activity seen in recent months. This has been surprising for a few different reasons, as this is not something that can be said for markets in emerging Asia as a whole. This essentially suggests that economic activity in the region has been somewhat disjointed and that trends visible in one country cannot necessarily be expected in another. But when we look at chart activity in the rupiah itself, we can see that the broader trends have started to change over the last two months.

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Both Indonesian stocks and the rupiah continued to slide on Thursday (04/06) and seem to be caught in a vicious downward spiral brought about by both domestic and international factors. Indonesia’s benchmark stock index (Jakarta Composite Index) fell 0.68 percent to close at a five-week low of 5,095.82 points, while the rupiah depreciated 0.39 percent to IDR 13,281 per US dollar (Bloomberg Dollar Index), a level last seen in the late 1990s when the country was plagued by the Asian Financial Crisis.

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On the first trading day of the new week, both Indonesian stocks and the rupiah moved more-or-less sideways. Generally, indices in Southeast Asia were mixed as positive external sentiments were offset by local negative sentiments. In the case of Indonesia, negative local sentiments stemmed from the higher-than-estimated inflation figure in May and continued contraction of the manufacturing industry. Positive market sentiments stemmed from the USA where GDP growth was revised to minus 0.7 percent in Q1-2015.

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Most stock markets and currencies in Southeast Asia weakened on Friday (29/05), including Indonesia’s benchmark Jakarta Composite Index and the rupiah. The Jakarta Composite Index fell 0.40 percent to 5,216.38 points, while the rupiah depreciated 0.01 percent to IDR 13,224 per US dollar according to the Bloomberg Dollar Index. Over the past week, Indonesian stocks and the rupiah weakened primarily due to the Greek debt crisis, looming higher US interest rates and the lack of positive domestic factors.

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In line with other Asian indices, Indonesian stocks rose on Tuesday (26/05). The benchmark Jakarta Composite Index rose 0.62 percent to 5,320.90 points. Positive sentiments did not originate from the USA as US stock markets were closed for a holiday yesterday but primarily stemmed from China where the economic planning agency announced to implement several new policies in a bid to boost the sluggish economy. The rupiah, however, depreciated 0.25 percent to IDR 13,220 per US dollar based on the Bloomberg Dollar Index.

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