Agus Martowardojo, Governor of Indonesia’s central bank (Bank Indonesia), predicts that the current economic turmoil in the Eurozone, caused by the Greek debt crisis, will impact on the stability of developing countries, including Indonesia. Although in terms of both trade and investment there should not be a real impact originating from Greek turmoil, the perception of macroeconomic stability will be somewhat hit on the back of global uncertainty. In line with most markets, Indonesian stocks and the rupiah weakened on Monday (06/07).

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Eric Sugandi, Chief Economist at the Standard Chartered Bank, expects Indonesia’s rupiah to have depreciated to IDR 13,900 per US dollar by the end of the year from IDR 13,339 currently (29/06) due to the impact of the bullish US dollar ahead of monetary tightening in the USA and the looming Greek exit from the Eurozone. Actually, this is a conservative prognosis. In case Indonesia’s central bank does not raise its benchmark interest rate (BI rate), currently at 7.50 percent, pressures on the rupiah may increase in fact increase further.

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Although Indonesia is considered as one of the Asian economies that is particularly vulnerable to a Greek exit from the euro (‘Grexit’), Indonesian stocks and the rupiah did not decline as heavily as other emerging market assets on Monday’s trading day (29/06), the first trading day after the collapse of talks between debt-ridden Greece and its international creditors. Indonesia’s benchmark Jakarta Composite Index fell 0.82 percent to 4,882.59 points while the rupiah depreciated 0.24 percent to IDR 13,339 per US dollar (Bloomberg Dollar Index).

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Most stock indices across the world continued to fall on Friday (26/06) on heightened concern that debt-ridden Greece will fail to reach an agreement with its international creditors. The deal is necessary for Greece to obtain bailout funds in order to avoid a default on its debt to the International Monetary Fund (IMF) due on 30 June 2015. A default could mean a Greek exit (Grexit) from the Eurozone and jeopardizes stability of the whole financial system of the region. Talks between both sides will continue into the weekend.

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As Greece and its international creditors have failed to reach an agreement (yet) regarding the disbursement of crucial bailout funds for the debt payment of debt-ridden Greece to the International Monetary Fund (IMF) later this month, most Asian stocks fell on Thursday (25/06) in cautious trading. Indonesia’s benchmark stock index (Jakarta Composite Index) fell 0.68 percent to 4,920.04 points, while the rupiah depreciated 0.20 percent to IDR 13,328 per US dollar according to the Bloomberg Dollar Index.

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On Tuesday (23/06) Asian stock indices extended gains on optimism that debt-ridden Greece will not default and stays within the Eurozone. Although Eurozone leaders reminded that there is still work to be done before an agreement can be reached between Greece and its creditors, markets are confident that the deal is only a matter of time. However, similar to yesterday, Indonesia’s benchmark stock index did not follow this global positivity and instead declined 0.44 percent to 4,937.65 points.

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Indonesian stocks rebounded on Tuesday (16/06). The country’s benchmark Jakarta Composite Index rose 0.72 percent to 4,872.60 points supported by foreign net buying and rebounding from yesterday’s 13-month low position. Middle and longer term investors now have great opportunity to find stocks at bargain prices (particularly those stocks that are not too exposed to the weakening rupiah). However, trading volume was low at about 60 percent of the past 30-day average thus indicating that market participants remain wary.

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The central bank of Indonesia (Bank Indonesia) is expected to leave its interest rate regime unchanged at Thursday’s Board of Governor’s meeting. Currently, Bank Indonesia’s key interest rate (BI rate) stands at 7.50 percent, the overnight deposit facility at 5.50 percent, and the lending facility rate at 8.00 percent. The central bank seems committed to this relatively high interest rate environment as the country’s inflation accelerated to 7.15 percent (y/y) in May, while the rupiah touched a 17-year low on 9 June 2015.

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In line with the performance of most other stock indices in Asia today (15/06), Indonesia’s benchmark Jakarta Composite Index (IHSG) fell over one percent in the first trading session. Primary reasons for this weak performance are concerns about stalled negotiations between Greece and its Eurozone creditors. Negotiations broke down without a deal on the bailout aid causing raising worries about a Greek default on its debt (a payment is due at the end of this month) as well as a Greek exit from the Eurozone (“Grexit”).

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Immediately after the opening of trade on Wednesday (10/06), Indonesian stocks rebounded sharply. Yesterday, Indonesia’s benchmark stock index (Jakarta Composite Index) had fallen 2.30 percent due to worries about looming higher US interest rates later this year, the Greek debt crisis in the Eurozone, heavy rupiah depreciation, and weak domestic macroeconomic data (such as Indonesia’s high inflation, disappointing Q1-2015 economic growth, the still wide current account deficit, and the central bank’s falling forex reserves).

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The benchmark stock index of Indonesia - known as the Jakarta Composite Index or IHSG - rose 0.17 percent to 4,921.39 points on Tuesday (13/05), impacted by investors' reaction to positive earnings reports of Indonesian coal miners in the first quarter of 2014. Today, foreign investors recorded net buying of IDR 64 billion (USD $5.6 million) and accounted for 31 percent of trading activity. However, investors remain cautious ahead of the presidential election that is scheduled for 9 July 2014 and wait for more clarity about the (vice) presidential candidates that will compete.

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While most emerging Asian currencies fell, the Indonesian rupiah exchange rate appreciated 0.08 percent to IDR 11,523 per US dollar based on the Bloomberg Dollar Index on Monday (12/05). The depreciating Chinese yuan, after its central bank set the midrate at its lowest level in eight months, put pressure on other Asian currencies. Today, Indonesia's Finance Ministry sold IDR 10 trillion rupiah (USD $867 million) of bonds, higher than the indicative target of IDR 8 trillion rupiah. Meanwhile, Indonesia’s two-year bonds gained.

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Completely opposite to our expectations, the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) managed to climb 0.57 percent to 4,862.02 points on Wednesday (07/05). The gain was unexpected as there were no clear factors that could provide positive market sentiments. Moreover, today's Asian stock indices were mostly down. Coincidence or not, tomorrow Bank Indonesia will announce whether its benchmark interest rate (BI rate) - currently set at 7.50 percent - will be changed or maintained.

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At the end of Friday’s trading day (02/05), the Indonesian rupiah exchange rate appreciated 0.32 percent to IDR 11,525 per US dollar based on the Bloomberg Dollar Index. The rupiah performed better than most of its regional emerging peers as inflation and trade data, which were released today by Statistics Indonesia, provided positive market sentiments. Indonesian inflation eased to 7.25 percent (year-on-year) in April 2014, from 7.32 percent a month earlier. Meanwhile, the country posted a trade surplus of USD $673 million in March 2014.

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On the first trading day of the week (Monday 28 April 2014), the Indonesian rupiah exchange rate depreciated 0.19 percent to IDR 11,587 per US dollar based on the Bloomberg Dollar Index. Several factors - both internal and external - influenced the rupiah as well as Indonesian stocks in a negative way. The benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) declined a whopping 1.61 percent to 4,818.76 points, in line with the regional trend in Asia today.

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The Indonesian rupiah exchange rate ended the week with a 0.32 percent gain to IDR 11,565 per US dollar on Friday (25/04) based on the Bloomberg Dollar Index. Despite still high local demand for US dollars ahead of the month-end (for reasons of profit repatriation, imports and debt repayments), the rupiah managed to appreciate as (foreign and domestic) investments in Indonesia were reported to have reached a new record at IDR 106.6 trillion (USD $9.4 billion) in the first quarter of 2014.

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Due to a lack of positive domestic and external sentiments, the Indonesian rupiah exchange rate has depreciated to a six-week low against the US dollar. Based on the Bloomberg Dollar Index, Indonesia's currency declined 0.66 percent to IDR 11,521 per US dollar by 16:22 local Jakarta time. In fact, several negative domestic sentiments are the reason behind the current depreciation. Firstly, revived concerns about Indonesia's current account deficit and, secondly, concerns about capital outflows due to dividend payments.

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After having recorded a five-day winning streak, Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG) fell 0.10 percent to 4,892.29 points on Monday (21/04). The forming of a doji star and limited movement of the IHSG (due to reduced buying volume) implied that - without the publication of good news triggering positive market sentiments - the index would decline. Today's depreciation of the Indonesian rupiah exchange rate and mixed Asian indices were reasons for investors to engage in profit taking.

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Indonesia's benchmark stock index (known as the IHSG or Jakarta Composite Index) posted another small gain on Wednesday (16/04), thus extending its winning streak to four days. The index gained 0.06 percent to 4,873.01 points. Despite slowing GDP growth in China, a depreciating rupiah exchange rate (responding to slightly higher US chain store sales and expected higher US building permits as well as US manufacturing production) and foreign investors recording a net sell, the index stayed in the green zone.

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The Indonesian rupiah exchange rate moved within limited range on Wednesday. Based on the Bloomberg Dollar Index, the currency depreciated 0.07 percent to IDR 11,436 per US dollar. Since Thursday (10/04), the rupiah has had to cope with pressures as Indonesia's legislative election was unable to provide political certainty. On the other hand, the country's improved economic fundamentals - easing inflation and the narrowing current account deficit - have resulted in capital inflows, thus supporting the rupiah.

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