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The Indonesian rupiah continued its remarkable rally on Tuesday (22/12). The currency had appreciated 0.98 percent to IDR 13,672 per US dollar by 11:10 am local Jakarta time (Bloomberg Dollar Index). The rupiah has recovered from a recent low of IDR 14,123 on Monday 14 December to IDR 13,672 per US dollar, a 3.2 percentage point advance in about one week. There are several matters that explain this remarkable performance.
The Indonesian rupiah is strengthening remarkably against the US dollar on Monday (21/12) despite expectation that the rupiah will become the worst-performing Asian currency in 2016 on capital outflows (amid more US interest rate hikes planned for 2016), Indonesia's falling foreign exchange reserves, and persistent low commodity prices. Based on the Bloomberg Dollar Index the Indonesian rupiah had appreciated 1.13 percent to IDR 13,760 per US dollar by 14:20 pm local Jakarta time on Monday (21/12).
On 20 December 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as updates on the performance of Indonesian stocks and the rupiah, Indonesia's interest rate environment, the trade balance, the country's energy mix, updates of the performance of listed companies, and more.
Stock indices in Southeast Asia plunged on Friday (18/12), led by benchmark indices in Thailand and Indonesia. These Asian markets followed the global correction that occurred after investors weighed in the possible impact of the Federal Reserve's interest rate hike. US and European stocks dropped on Thursday and Friday, while prices of oil and other commodities continued to slide. Indonesia's Jakarta Composite Index fell 1.92 percent to 4,468.65 points.
After the rally on Thursday (responding positively to the Federal Reserve's announcement to raise its Fed Fund Rate), Indonesian assets are weakening on Friday (18/12) while most other Asian markets are down. Indonesia's benchmark Jakarta Composite Index was down 1.20 percent to 4,501.34 points by 09:45 am local Jakarta time, while the Indonesian rupiah had depreciated 0.22 percent to IDR 14,040 per US dollar (Bloomberg Dollar Index). As such, Indonesian stocks are following the example of US stocks that plunged overnight.
Bank Indonesia, the central bank of Southeast Asia's largest economy, kept its key interest rate (BI rate) at 7.50 percent at the December policy meeting on Thursday (17/12). Meanwhile, the overnight deposit rate facility (Fasbi) was left unchanged at 5.50 percent and the lending facility at 8.00 percent. It was the tenth consecutive month without changing the country's interest rate environment (in February 2015 the central bank cut the BI rate by 0.25 percent).
Indonesian stocks and the rupiah responded highly positive to the decision of the US Federal Reserve to raise its key Fed Fund Rate by 25 basis points on Wednesday (16/12). Indonesia's benchmark stock index (Jakarta Composite Index) soared 1.62 percent to 4,555.96 points, while the rupiah appreciated 0.44 percent to IDR 14,009 per US dollar. Not only in Indonesia but also globally stocks thrived on the ending of prolonged uncertainty about the timing of the US interest rate hike.
The US Federal Reserve finally decided to raise the Fed Fund Rate by 25 basis points at its December policy meeting (15-16 December) on a considerable improvement in US labor market conditions (the US unemployment rate having fallen to 5 percent) and US inflation projected to meet the Fed's 2 percent target over the medium term. After this announcement US stocks soared. Emerging markets were not hit by severe capital outflows after the rate hike. Asian stock indices strengthened sharply on Thursday morning (17/12).
In line with expectations and the general trend so far this year, Indonesian car sales fell 4.4 percent to 87,311 units in November 2015. In the January-November 2015 period, the country's total car sales reached 940,317 units, down 16.7 percent from car sales in the same period last year. The main cause of this weak performance is Indonesians' weakened purchasing power amid the country's economic slowdown, high inflation (in the first three quarters of the year), and low commodity prices.
Stock markets in Asia are experiencing rough weather as investors pull funds out of emerging markets. By 11:25 am local Jakarta time, Indonesia's benchmark Jakarta Composite Index had plunged 1.11 percent to 4,344.69 points, while the rupiah had depreciated 0.54 percent to IDR 14,068 per US dollar (Bloomberg Dollar Index). Investors are seeking safe(r) haven assets as the Federal Reserve is expected to raise its key Fed Fund Rate (for the first time in almost a decade) at its next FOMC meeting (scheduled for 15-16 December).
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Both Indonesia’s rupiah exchange rate and stocks strengthened on Tuesday (27/01) as concerns about Greece exiting the Eurozone somewhat eased while the positive market sentiments that were caused by the European Central Bank’s recently unfolded quantitative easing program are still felt. Indonesia’s benchmark stock index (Jakarta Composite Index) gained 0.33 percent to 5,277.15 points, while the rupiah appreciated 0.31 percent to IDR 12,469 per US dollar based on the Bloomberg Dollar Index.
Indonesian stocks hit a record high on Thursday (22/01). Most emerging Asian stocks and currencies strengthened on increased speculation that the European Central Bank (ECB) is to launch a massive bond-buying program (which was confirmed later on the day after Asian markets had closed), a move aimed at boosting inflation in the Eurozone and which puts pressure on euro-denominated assets. The euro had depreciated 1.67 percent against the US dollar by 11:20 ET on Thursday based on Bloomberg data.
The Indonesian rupiah exchange rate appreciated 0.76 percent to IDR 12,481 per US dollar on Wednesday (21/01) based on the Bloomberg Dollar Index. The performance of the rupiah was in line with most other emerging Asian currencies as Japan’s yen strengthened (against the US dollar) after Japan’s central bank announced to maintain an accommodative monetary policy in an attempt to boost inflation to two percent (y/y). Furthermore, speculation about quantitative easing in Europe boosted attractiveness of riskier Asian assets.
The Indonesian rupiah exchange rate depreciated on Wednesday (14/01) as global oil and other commodity prices continued to fall thus casting a negative spell on Indonesia’s currency. The rupiah depreciated 0.11 percent to IDR 12,614 per US dollar according to the Bloomberg Dollar Index. Market participants are concerned about the negative influence of low commodity prices on Indonesia’s export performance. Southeast Asia’s largest economy has had to cope with a wide trade and current account deficit in recent years.
In line with the performance of other Asian emerging currencies, Indonesia's rupiah exchange rate appreciated on Monday (12/01) as the fall in US wages (released late last week) caused speculation that the Federal Reserve will - for now - delay its plan to start raising US borrowing costs. Despite solid growing US non-farm payrolls in December 2014, US wages (average hourly earnings) fell the most in eight years. Indonesia’s rupiah appreciated 0.38 percent to IDR 12,599 per US dollar according to the Bloomberg Dollar Index.
The Indonesian rupiah exchange rate and Indonesian stocks gained on the last trading day of the week in line with the performance of other emerging markets. Indonesia’s benchmark stock index (Jakarta Composite Index, abbreviated IHGS) rose 0.09 percent to 5,216.67 points, while the rupiah appreciated 0.22 percent to IDR 12,647 according to the Bloomberg Dollar Index. The positive performance was mainly caused by speculation that the unexpected fall in US wages will keep the US central bank from raising its key interest rate soon.
Both the Indonesian rupiah exchange rate and stocks continued to fall on Tuesday (06/01) as global conditions remained unconducive. Indices on Wall Street had declined sharply yesterday as the global oil prices fell below USD $50 per barrel fueling concerns about a weaker global economy. Similarly, most Asian stock indices declined as Japan's yen appreciated and energy stocks were sold by investors. Indonesia’s benchmark Jakarta Composite Index fell 0.98 percent to 5,169.06 points.
Indonesia’s rupiah exchange rate and stocks opened stable on Wednesday (17/12) after two days marked by severe pressures on emerging market assets. By 11:30 am local Jakarta time, Indonesia’s rupiah was down 0.09 percent to IDR 12,736 per US dollar (according to the Bloomberg Dollar Index), while Indonesian stocks were up 0.41 percent by the same time. Yesterday, the rupiah nearly touched IDR 13,000 per US dollar (its lowest level since the Asian Financial Crisis in 1997-1998), before the central bank decided to support the currency.
Amid weakening emerging Asian currencies, Indonesia’s rupiah exchange rate touched a six-year low on Friday (12/12) after US consumer spending rose in November while US jobless claims fell (signalling a strong recovery in the world’s largest economy). Based on the Bloomberg Dollar Index, the rupiah depreciated 0.95 percent to IDR 12,467 per US dollar on Friday. Besides the impact of the US dollar’s bullish momentum, the rupiah also weakened on year-end US dollar demand from local companies for debt payments.
Contrary to the previous trading day, most emerging Asian currencies strengthened against the US dollar on Tuesday (09/12) supported by the yen’s advance as falling oil prices dented risk appetite. Based on the Bloomberg Dollar Index, Indonesia’s rupiah appreciated 0.47 percent to IDR 12,331 per US dollar today. Despite local firms’ increased US dollar demand to settle debt before the year-end, market participants were happy to learn that Indonesia’s central bank is active in the foreign exchange market to guard the currency.
