The Indonesian rupiah exchange rate is experiencing a weak start of the New Year. According to the Bloomberg Dollar Index, Indonesia’s currency had depreciated 1.26 percent to IDR 12,543 per US dollar by 13:35 pm local Jakarta time on Friday (02/01). However, this weak performance is in line with the performance of other emerging Asian currencies against the US dollar on today’s trading day (amid an improving US economy), thus extending the depreciating trend that started in the second half of 2014.

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On one of the last trading days of 2014, Indonesia’s rupiah exchange rate is moving sideways. According to the Bloomberg Dollar Index, the currency of Southeast Asia’s largest economy had depreciated 0.04 percent against the US dollar by 11:15 am local Jakarta time. Last week, the rupiah had nearly touched IDR 13,000 per US dollar, its weakest level since the Asian Financial Crisis in the late 1990s, amid severe volatility on global currency markets triggered by bullish US dollar momentum and developments in Russia and China.

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Although many currencies weakened against the US dollar after the US Federal Reserve stated that it is on track to raise its key Fed Fund Rate "somewhere next year" amid structural improvement of the US economy (after having kept the rate near zero for a "considerable time"), Indonesia's rupiah opened strong on Thursday (18/12). Based on the Bloomberg Dollar Index, Indonesia’s currency had appreciated 0.91 percent to IDR 12,553 per US dollar at 9:15 local Jakarta time.

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Troubles continued on Tuesday (16/12) for emerging markets. Currencies and stocks in the Asia-Pacific were mostly down amid a significant interest rate hike by Russia’s central bank, falling oil prices, and expected weakening of China’s manufacturing activity. Indonesian stocks were down 1.81 percent to 5,014.53 points by 11:20 am local Jakarta time, while the rupiah had depreciated 0.88 percent to 12,825 per US dollar by the same time according to the Bloomberg Dollar Index.

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The Indonesian rupiah exchange rate depreciated to its lowest level since August 1998 (when Indonesia was in the early recovery stage from the Asian Financial Crisis). According to the Bloomberg Dollar Index, the rupiah had depreciated 1.78 percent to IDR 12,689 per US dollar by 12:50 pm local Jakarta time on Monday (15/12). This weak performance is caused by bullish momentum of the US dollar (amid the improving US economy) in combination with local year-end US dollar demand for debt repayments.

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Indonesia’s central bank decided to keep its benchmark interest rate (BI rate) at 7.75 percent at Thursday’s Board of Governors’ Meeting (11/12). The Lending Facility and Deposit Facility were kept at 8.00 percent and 5.75 percent, respectively. The central bank is convinced that the current interest rate levels are effective to combat short-term inflationary pressures (triggered by the implementation of higher subsidized fuel prices in mid-November) pushing it back to the target corridor of between 3 and 4 percent (y/y) in 2015.

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The central bank of Indonesia announced that the country’s foreign exchange reserves declined USD $900 million to USD $111.1 billion at the end of November 2014. The decline was primarily due to government debt repayments and the central bank’s use of foreign exchange to engage in monetary management. Meanwhile, the Indonesian rupiah exchange rate - which had touched six year lows in recent days - appreciated 0.08 percent to IDR 12,299 per US dollar on Friday (05/12) based on the Bloomberg Dollar Index.

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Based on the Bloomberg Dollar Index, Indonesia’s rupiah exchange rate depreciated 0.24 percent to IDR 12,301 per US dollar on Wednesday (03/12), the weakest level of Indonesia’s currency in almost six years, as the US dollar rallied, pushing Japan’s yen to a seven-year low, Malaysia’s ringgit to a five-year low, while the Russian ruble experienced record falls. Meanwhile, the euro touched a two-year low amid the sluggish economic growth forecast in the Eurozone. Policies of central banks across the globe have led to significant currency volatility.

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The Finance Ministry of Indonesia announced that the government sold IDR 12 trillion (roughly USD $1 billion) worth of conventional bonds on Tuesday (14/10), far above the indicative target of IDR 8 trillion (USD $667 million). High demand shows that investors have confidence in the debt markets of Southeast Asia’s largest economy. Previously, it had been reported that proceeds of the bonds will be used to finance the country’s budget deficit in 2014. Six series of bonds, with maturities ranging between 2015 and 2044, were offered.

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The government of Indonesia eyes to raise up to IDR 8 trillion (USD $667 million) in a bond auction set for Tuesday (14/10). The proceeds of this bond issuance will be used to finance the country’s state budget deficit in 2014. The Finance Ministry said that the Indonesian government will offer six series of bonds, with maturities ranging between 2015 and 2044. For analysts this issuance is an important test to measure investors’ confidence (particularly foreign investors) in Indonesia’s debt markets.

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The Jakarta Composite Index (IHSG) rebounded on Thursday's trading day (17/10), supported by good news from the United States where finally an agreement was reached regarding the US debt ceiling. This agreement brought positive market sentiments on Asian stock markets, including the IHSG which rose 0.59% to 4,518.93 points. Moreover, Indonesia's minister of Economy Hatta Rajasa stated that Indonesia had not been significantly impacted by the US shutdown issue and this statement also managed to ease investors' concerns.

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Although part of the market players on Indonesia's Stock Exchange (IDX) engaged in profit taking after Indonesia's benchmark index (IHSG) climbed for two consecutive days, the index still posted growth of 0.71 percent to 4,418.64 points on Thursday (03/10). Factors that contributed to today's gain were the depreciating US dollar as no solution has been found yet concerning the shutdown, generally rising Asian stock indices and the positive message that is conveyed in the APEC meeting in Bali.

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Despite some appetite for profit taking, the key stock index of Indonesia (IHSG) was able to rise 0.96 percent to 4,387.60 points on Wednesday (02/10). The index was supported by the appreciating rupiah, a few rising Asian stock indices and foreign net stock purchases. The Indonesian rupiah rose against the US dollar as the latter was impacted upon by the debt ceiling and shutdown issue in the USA. Asian stock indices were mixed. Concerns about the shutdown were offset by rising Asian currencies against the US dollar.

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Both the Indonesian currency and the benchmark stock index (IHSG) continued their fall on Tuesday (24/09). Wall Street's weak performance on the last three trading days was a major factor that brought negative market sentiments to the Indonesia Stock Exchange (IDX). Even good openings in Europe were not able to push the IHSG back into green territory. The index fell 2.25 percent to 4,460.41 points. Foreign investors were net sellers of Indonesian stocks, while domestic investors were net buyers.

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Indonesia's benchmark stock index (IHSG) extended its downward movement on Monday (23/09) as investors continued to look for profits after the index had risen sharply following the announcement that the US quantitative easing program will not be ended yet. Pressures on the IHSG were intensified by the depreciating rupiah and the weakening of Hong Kong's Hang Seng Index (which was partly brought on by a typhoon). Despite foreign investors being net buyers of Indonesian stocks, the IHSG fell 0.46 percent to 4,562.86 points.

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Market participants are waiting for the outcome of the Federal Reserve's FOMC meeting, which will deal with the future of the quantitative easing program. The wait and see attitude of investors made the benchmark index of Indonesia (IHSG) fall 1.20 percent to 4,463.25 points. Few big cap stocks were able to rise and although some second liners were up, it was not enough to push the IHSG into the green zone. The rupiah continued to weaken and foreign investors were again mostly selling their Indonesian assets.

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Investors all around the world are in anticipation of the Federal Reserve's decision to scale back the monthly USD $85 billion bond-buying program known as quantitative easing (QE3). If indeed scaled back, then another important question remains: how much will the bond-buying program be toned down? Today (18/09), is the last day of the Fed's FOMC meeting in which these decisions are made. The market expects no drastic end to the program, instead a gradual toning down (between USD $10 to $20 billion) is anticipated.

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After a strong performance yesterday, the Jakarta Composite Index (IHSG) fell 0.10 percent to 4,517.62 points on Tuesday (17/09). Part of the investor community grabbed their chance to engage in profit taking after yesterday's gain but most investors are careful and reluctant to make any major decision prior to the result of the Federal Reserve's FOMC meeting (17-18 September). It is expected that after this meeting there will be more clarity about the future of the Fed's quantitative easing program.

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Indonesia's benchmark stock index (IHSG) could not continue its rebound on Wednesday (04/09). Amid mostly falling Asian markets, the IHSG fell 2.17 percent to 4,073.46 points. Asia was on a four-day winning streak but after president Obama received support from the Republican speaker of the House of Representatives, John Boehner, regarding military actions in Syria, global investors shied away from riskier assets. Indonesia and India are currently viewed as weak investment targets due to the countries' current account deficits.

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The decision of Indonesia's central bank (Bank Indonesia) to raise its benchmark interest rate by 50 basis points to 7.00 percent and its deposit facility (Fasbi) by 0.50 percent to 5.25 percent seem to have had a good impact on the value of Indonesia's stocks and the rupiah. Indonesia's benchmark stock index (IHSG) rose 2.23 percent to 4,195.09 points on Friday (30/08), implying a three-day winning streak. Since the first trading day of this year, the IHSG is down 3.47 percent.

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