In order to support Indonesia's sharply depreciated rupiah exchange rate, the central bank of Indonesia (Bank Indonesia or BI) improved provisions for Hedge Swap Transactions through Bank Indonesia Regulation No.15/17/PBI/2013 (which takes effect as of 3 February 2014). Through this arrangement, Indonesian banks can sell their US dollars to BI at the current spot rate and promise to buy the amount at a later date on an agreed rate. This protects banks against fluctuations in the rupiah exchange rate.

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Ahead of the new year, the Indonesia rupiah exchange rate continues its downward trend on Monday (30/12). Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) fell to IDR 12,270 per US dollar from IDR 12,260 on the previous trading day. Due to the improving US economy, the US dollar keeps appreciating against the majority of emerging currencies. At most local Indonesian banks, the rupiah is traded significantly above the psychological level of IDR 12,000 per US dollar.

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Indonesia's Finance Minister Chatib Basri expects that Indonesia's economic growth in 2013 will reach 5.7 percent, significantly below the government's initial target of 6.3 percent. Basri announced his expectation at the government's economic evaluation and projection meeting. According to Basri, Indonesia's economic growth is stable, despite its slowing trend. Among the G20 member countries, only China will post higher GDP growth (7.8 percent up to the third quarter). Indonesia's inflation rate is expected to reach 8.5 percent (yoy) at the year-end.

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In Bank Indonesia's Board of Governors' meeting - held on Thursday (12/12) - it was decided to keep the country's benchmark interest rate (BI rate) at 7.50 percent. Executive Director of Bank Indonesia's Communication Department Difi A. Johansyah said that the current rate of 7.50 percent is in line with the institution's inflation target of 4.5 percent (plus or minus one percent). The lending facility and deposite facility (Fasbi) rates are also maintained at 7.5 percent and 5.75 percent respectively.

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According to the Bloomberg Dollar Index, the Indonesia rupiah exchange rate fell 0.09 percent to IDR 11,976 per US dollar as per 13:46:18 local Jakarta time on Friday (06/12). It is expected that this slight depreciation of the rupiah will continue for the remainder of the trading day. The rupiah received some support from Moody's Investors Service, which stated that the rupiah depreciation itself is not a trigger for a rating downgrade. The ratings agency affirmed the country's Baa3 rating due to Indonesia's strong growth and low debt level.

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The Indonesia rupiah exchange rate continued its depreciation on Wednesday (04/12). The central bank's Jakarta Interbank Spot Dollar Rate fell 1.09 percent to IDR 11,960 per US dollar after absorbing the impact of the currency's weak performance on yesterday's spot market. On Tuesday (03/12), local Indonesian companies were buying US dollars at a more attractive exchange rate after the currency had appreciated previously, thus placing serious downward pressure on the currency of Southeast Asia's largest economy.

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Although according to Bank Indonesia's Jakarta Interbank Spot Dollar Rate, the Indonesian IDR rupiah exchange rate appreciated 0.97 percent to IDR 11,830 per US dollar on Tuesday (03/12), the currency declined 0.98 percent to IDR 11,885 as of 02.01 ET according to the Bloomberg Dollar Index. The difference between both rates is caused by the fact that Bank Indonesia's rate had not yet absorbed the positive reaction of market participants toward trade and inflation data that were released on Monday (02/12).

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The Indonesian rupiah exchange rate extended its losing streak on Thursday (28/11). Bank Indonesia's mid rate plunged 0.99 percent to IDR 11,930 per US dollar, thus moving closer toward the psychological level of 12,000. Various local banks have already set the value of the currency above the 12,000 level on the spot market. It is the weakest level of the rupiah since 2009. Since Monday (25/11), the mid rate has depreciated 1.77 percent. This year so far, the currency has fallen 23.37 percent, thus becoming the worst performing Asian currency.

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The Indonesian rupiah exchange rate maintained its downward trend on Wednesday (27/11). Bank Indonesia's mid rate depreciated 0.41 percent to IDR 11,813 per US dollar. Investors remain concerned about Indonesia's wide current account deficit. Today, Finance Minister Chatib Basri said that the current account deficit will be around USD $30 billion by the end of 2013, significantly up from USD $24 billion at the end of 2012. In the third quarter of 2013, the current account deficit was USD $8.4 billion (3.8 percent of Indonesia's GDP).

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On Tuesday (26/11), Bank Indonesia's mid rate depreciated 0.37 percent to IDR 11,765 per US dollar, which is the lowest level the currency has touched since March 2009. Main reason for today's decline is the government's US dollar-denominated bond auction yesterday (25/11) that fell USD $450 million short of its target. The bond issuance was negatively impacted by investors' concern about the looming scaling back of the Federal Reserve's quantitative easing program as US economic data improve.

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On Thursday's trading day (21/11/13), the Jakarta Composite Index (Indonesia's benchmark stock index, or IHSG) fell 0.56 percent to 4,326.21 points as investors are concerned seeing the result of the latest Federal Open Market Committee (FOMC) meeting, which seems to indicate that the Federal Reserve's monthly USD $85 billion bond-buying program (quantitative easing) will be wound down within a couple of months. The IHSG was also negatively affected by the lower preliminary HSBC Manufacturing PMI of China.

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Indonesia's Jakarta Composite Index (IHSG) started Tuesday's trading day (12/11) slightly in the red. However, after the central bank of Indonesia (Bank Indonesia) announced to have raised its benchmark interest rate (BI rate) by 25 bps to 7.50 percent, the IHSG quickly plunged. The interest rate hike is considered as a sign that Bank Indonesia is still concerned about the nation's macroeconomy, particularly Indonesia high inflation (8.32 percent yoy in October 2013). The index fell 1.38 percent to 4,380.64 points.

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The Jakarta Composite index (Indonesia's benchmark stock index or IHSG) fell on Monday (11/11) amid mixed Asian markets. Not even positive finishes on Wall Street last Friday (08/11) were able to support the IHSG. Most investors seem to be waiting for results of Bank Indonesia's Board of Governor's Meeting which is scheduled for Tuesday (12/11). This meeting will provide answers about the central bank's view of the domestic economy and whether it thinks another adjustement of the BI rate is necessary.

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After the one-day holiday due to the Islamic new year, Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) started in the red on Wednesday (06/11) amid the continued depreciation of the rupiah exchange rate against the US dollar and the mixed performance of Asian stock indices (influenced by weakening global indices on the previous day). However, during the day a number of stocks, which had fallen previously, became popular investment targets, which supported the index.

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The Jakarta Composite Index (Indonesia's benchmark stock index) fell 1.73 percent on Friday (01/11) to 4,432.58 points. A persistent concern for investors is the tapering issue of the Federal Reserve's quantitative easing program. Analysts expect the program to continue at a pace of USD $85 billion per month until at least March 2014, but investors remain concerned. Another issue that brought negative market sentiments was September's trade figure, which was released today. In September, Indonesia recorded a trade deficit of USD $657.2 million.

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In line with falling Asian indices, Indonesia's benchmark stock index (the Jakarta Composite Index or IHSG) was down on Tuesday (29/10). Investors are cautious ahead of the Federal Reserve meeting and thus used today to engage in profit taking. The IHSG fell 0.60 percent to 4,562.77 points. Moreover, the appreciating trend of the rupiah exchange rate was disturbed ahead of the Fed meeting and which also formed a contributing factor for the fall of the IHSG today. Foreign investors recorded a net sell, while domestic investors recorded a net buy.

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Wall Street and European indices being up at the end of last week had a positive impact on Asian stock indices on Monday (28/10), despite experiencing a correction during today's trading day. The Jakarta Composite Index (IHSG), Indonesia's benchmark stock index, joined this trend. After making a strong start, it became susceptible to profit taking and thus had a mixed performance although it ended at 4,590.54 points, a 0.21 percent increase. The IHSG was supported by foreign net buying and an appreciating rupiah exchange rate.

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Indonesia's benchmark stock index, the Jakarta Composite Index (IHSG), was unable to continue its rising trend of the last week on Tuesday's trading day (22/10). Mixed indices in the United States on the previous day in combination with falling indices in Asia impacted negatively on the IHSG. Other factors that contributed to the IHSG's 1.43 percent downslide to 4,512.74 on Tuesday were weak openings of stock indices in Europe as well as continued foreign selling of Indonesian stocks.

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Rising global stock indices at the end of last week continued to impact positively on Asian stock indices on Monday (21/10), including Indonesia's Jakarta Composite Index (IHSG). Moreover, speculation that the Federal Reserve will not alter its quantitative easing program until early next year also brought along positive market sentiments. This is expected to result in the inflow of US dollars into emerging markets. On Monday, the IHSG rose 0.70 percent to 4,578.18 despite continued foreign selling and rupiah depreciation.

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The Jakarta Composite Index (IHSG), the benchmark stock index of Indonesia, gained 0.61 percent and ended on 4,546.57 on Friday (18/10). Stock trade showed a consolidating trend with the value of transactions in the regular market amounting to IDR 4.39 trillion (USD $388.5 million). Considering the full trading week, the IHSG gained 0.60 percent with an average daily transaction value of IDR 4.18 trillion. This value is below the previous week's average of IDR 4,36 trillion.

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