Most Asian stock markets were stronger on Wednesday, led by Japan's Nikkei 225 Index which rose 2.70 percent on expectation of further government stimulus measures. Meanwhile, Indonesia's benchmark Jakarta Composite Index rose 1.09 percent to 4,223.91 points supported by the region's rising stock indices as well as on the back of the second installment of Indonesia's economic policy package. Meanwhile, the rupiah appreciated 0.26 percent to IDR 14,653 per US dollar (Bloomberg Dollar Index).

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Indonesian stocks experienced a remarkable roller coaster ride on Tuesday (29/09). After opening the benchmark Jakarta Composite Index fell more than two percent to a near three-year low. However, the index managed to finish the trading day at 4,178.41 points, a 1.41 percent rise. Meanwhile, Indonesia's rupiah managed to curb losses. Based on the Bloomberg Dollar Index, the rupiah passed beyond the IDR 14,800 per US dollar level several times but at the end of the day it had only weakened 0.11 percent to IDR 14,691 per US dollar.

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In an effort to support the ailing Indonesian rupiah, state-owned energy company Pertamina will cut its foreign exchange purchases on the spot market by around 50 percent. Pertamina together with state utility firm Perusahaan Listrik Negara (PLN) account for about half of Indonesia's daily foreign exchange (forex) transactions as these companies require US dollars for fuel purchases and overseas debt settlements.

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Indonesia's benchmark stock index (Jakarta Composite Index) was down over 2 percent, touching a three-year low, while the rupiah weakened beyond the IDR 14,800 per US dollar level (Bloomberg Dollar Index) around 09:00 am local Jakarta time on Tuesday (29/09) as the global selloff persists. Investors are concerned about the economic conditions of China and the world, low commodity prices, while anticipating a Fed Fund Rate hike.

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Stock indices in Asia were mixed on the first trading day of the week. Indonesia’s benchmark Jakarta Composite Index plunged 2.11 percent to 4,120.50 points (a two-year low), while the rupiah (remarkably) appreciated 0.13 percent to IDR 14,674 per US dollar according to the Bloomberg Dollar Index. Meanwhile, European markets were down after opening on Monday (28/09). What influenced these markets today?

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Indonesia plans to cut taxes for local exporters in a bid to boost the country’s foreign exchange reserves, while supporting the rupiah, as part of its second policy package. Indonesia’s rupiah has depreciated 18.1 percent since the start of 2015 due to looming higher US interest rates, low commodity prices, and China’s yuan devaluation. The government now plans to cut income tax on interest that exporters earn when depositing their export proceeds in local banks. Currently, income tax on bank interest (from deposit accounts) stands at 20 percent.

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After opening on Monday (28/09) Indonesian stocks rapidly fell amid mixed Asian markets. The main factor that causes several Asian markets to fall is declining Chinese industrial profits (triggering concern about a deepening slowdown of the world’s second-largest economy). China’s industrial profits fell 8.8 percent in August, down from July’s 2.9 percent drop. By 09:50 am local Jakarta time, the benchmark Jakarta Composite Index was down 1.41 percent to 4,150.27 points.

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The central bank of Indonesia (Bank Indonesia) is set to announce the second installment of a policy package that aims at raising onshore US dollar supplies (and liquidity). As the rupiah has been the second worst-performing Asian emerging market currency (after Malaysia’s ringgit), having depreciated 18.1 percent against the US dollar so far in 2015, Indonesian policymakers are anxious to prop up the ailing currency in order to safeguard the country’s financial stability. Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) stood at IDR 14,690 per US dollar on Friday (25/09), a 17-year low.

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Stock markets in Asia were mixed on Friday (25/09) after Federal Reserve Chairwoman Janet Yellen said in a speech at the University of Massachusetts that the US central bank is still on track to raise interest rates before the year-end (provided no economic shocks take place as the move is data-dependent). After this looming hike, Yellen suggests to gradually tighten US monetary policy thereafter.

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In line with other Asian emerging markets and currencies, Indonesian stocks and the rupiah are weakening on Friday (25/09) after Federal Reserve Chairwoman Janet Yellen said during her speech at the University of Massachusetts that US interest rates are likely to be raised before the year-end, provided no economic shocks occur. Yellen stated that most FOMC participants agree on a Fed Fund Rate hike later this year, followed by gradual further monetary tightening thereafter.

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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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Although most emerging market stocks fell, Indonesian stocks and the rupiah showed a solid performance on Thursday (21/05). The rupiah appreciated 0.40 percent to IDR 13,122 per US dollar according to the Bloomberg Dollar Index, while the benchmark stock index of Indonesia (Jakarta Composite Index) rose 0.39 percent to 5,313.21 points. Most emerging stocks fell due to weak data from China (despite a series of stimulus). However, Indonesian stocks were supported by news about its credit rating and dividend announcements.

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Investors are clearly waiting for results of Bank Indonesia’s Board of Governor’s Meeting, conducted today (19/05). In this monthly policy meeting, Indonesia’s central bank will decide on its monetary approach. For most market participants it is of crucial importance to learn whether Bank Indonesia will adjust its interest rate policy in order to support the country’s economic growth (which slowed to a five-year low in the first quarter of 2015). Ahead of results, scheduled to be released this afternoon, Indonesian stocks and the rupiah weaken.

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Over the last year, the Indonesian rupiah has been rising when compared to a wide variety of world currencies. Some of the more pronounced strength has been seen against the US dollar, which has been travelling in the opposite direction for most of the same period. To many investors that are focused on the currency markets, it might appear as though these two currencies are largely unrelated. But when we look at the trends that have been developing over the last year, it quickly becomes clear that this is just not the case.

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Ahead of the release of Indonesia’s official first quarter GDP growth figure (scheduled to be released in the first week of May), Indonesian stocks fell and the rupiah depreciated (slightly) against the US dollar on the back of weak market sentiments that have plagued Indonesian markets over the past week. Most importantly, weaker-than-expected Q1-2015 corporate earnings reports of listed Indonesian blue chips have made market participants concerned that Indonesia’s economic slowdown has continued into the first quarter of 2015.

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