The Indonesian rupiah exchange rate appreciated 0.86 percent to IDR 11,678 per US dollar on Monday (11/08) according to the Bloomberg Dollar Index. The rupiah was supported by internal and external factors. On the internal side, the rupiah strengthened as the Constitutional Court is expected to dismiss defeated presidential candidate Prabowo Subianto’s appeal. Former army general Subianto challenged the official election result, claiming that massive violations occurred at polling stations and during the counting process.

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The Indonesian rupiah exchange rate strengthened slightly on the last trading day of the week. On Friday (08/08), Indonesia’s currency appreciated 0.15 percent to IDR 11,779 per US dollar according to the Bloomberg Dollar Index. Most Asian currencies and stocks fell, while prices of gold and oil jumped, after US President Barack Obama agreed to air strikes in northern Iraq (aimed at Sunni extremist militants). In combination with continued tensions in Ukraine as well as Gaza, investors opt for risk aversion (and profit taking).

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Amid falling stocks and government bonds, the Indonesian rupiah exchange rate depreciated 0.45% to IDR 11,751 per US dollar according to the Bloomberg Dollar Index on Wednesday (06/08). This weak performance is caused by recent solid economic data from the USA, while tensions in the Ukraine are increasing (causing investors to prefer to invest in safe havens) after Russian President Vladimir Putin ordered a response to sanctions. Meanwhile, the euro lost ground to the US dollar after Germany posted unexpected declining factory orders.

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Despite the release of slowing Q2-2014 GDP growth as well as the June 2014 trade deficit, the Indonesian rupiah exchange rate appreciated 0.53 percent to IDR 11,698 against the US dollar according to the Bloomberg Dollar Index on Tuesday (05/08). This performance of Indonesia’s currency is in line with the performance of other emerging Asian currencies on today’s trading day. The US dollar weakened against almost all these currencies as lower US yields made investors decide to search for higher returns in Asia.

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According to data from the Financial Services Authority (OJK), foreign banks operating in Indonesia have posted great profit growth in the January to May 2014 period. Combined, these foreign banks have recorded a 94.36 percentage point growth (year-on-year) in profit to IDR 3.79 trillion (USD $323.9 million) in the first five months of this year. The reason behind this jump in profit is the sharply depreciated rupiah exchange rate. Over the course of 2013, the rupiah fell over 25 percent against the US dollar.

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On 3 August 2014, 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 in the last seven days. Most of the topics involve economic topics such as the performance of the rupiah exchange rate, July 2014 inflation, the Lebaran holiday period, foreign direct investment, palm oil export, an analysis of the Asian financial crisis, religion in Indonesia, and more.

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Although the Indonesia stock exchange as well as most businesses are still closed on Friday (01/08) amid Idul Fitri celebrations, trading in the Indonesian rupiah resumed after a four-day holiday. Impacted by developments in the USA, the Indonesian rupiah exchange rate had depreciated 1.82 percent to IDR 11,791 per US dollar by 12:25 pm local Jakarta time (based on Bloomberg Index). Asian currencies are heading for the largest weekly decline since June 2014 after US economic data indicate improved economic recovery of the USA.

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The benchmark stock index of Indonesia (Jakarta Composite Index, or IHSG) may reach a new record high level this week after market favourite Joko Widodo - popularly known as Jokowi - was officially announced the winner of the 2014 presidential election by the General Elections Commission (KPU) on Tuesday (22/07). Not unimportantly, the final decision was not accompanied by any riots or social unrest Jakarta or other parts of the Archipelago, thus giving investors some more peace of mind regarding the stability of Indonesian assets.

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The performance of the Indonesian rupiah exchange rate and stocks has been impacted by defeated presidential candidate Prabowo Subianto’s withdrawal from the General Elections Commission’s electoral process on Tuesday (22/07). Although the Commission (KPU) has not publicly announced the outcome of the 2014 presidential election yet, Subianto’s response is a clear sign that rival Joko Widodo - as expected - has won the election. Subianto claims that the KPU is corrupt and will challenge the outcome in the Constitutional Court.

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Indonesian president Susilo Bambang Yudhoyono, who will end his second and final five-year term in October 2014, announced to meet both presidential candidates (Prabowo Subianto and Joko Widodo) in the country’s State Palace on Sunday (20/07). In this meeting, president Yudhoyono will emphasize the importance of a peaceful and orderly transition to the next government. Currently, it remains unknown who of the two candidates won the presidential election (held on 9 July 2014). Due to the tight race, chances of social unrest increase.

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Indonesian stocks plunged considerably on Thursday (02/10). The country’s benchmark stock index (Jakarta Composite Index, abbreviated IHSG) declined 2.73 percent to 5,000.81 points, the largest drop in almost six months. This poor performance was caused by both external and internal factors. Externally, various weak economic data from the USA and Europe as well as an appreciating yen impacted negatively on Asian stock indices. Internally, market participants responded negatively toward the inauguration of the new parliament.

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Although Indonesia’s September 2014 inflation (0.27 percent m/m) and appreciating rupiah exchange rate had a positive impact on the performance of Indonesia’s benchmark stock index (Jakarta Composite Index, abbreviated IHSG) on Wednesday (01/10), its gain was limited by declining indices on Wall Street on the previous day as well as Indonesia’s August trade deficit (USD $318.1 million), which resulted in foreign net selling of worth IDR 388 billion of Indonesian stocks. The IHSG climbed 0.06 percent to 5,140.91 points.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) rose 0.18 percent to 5,142.01 points on Monday (29/09) despite the sharp depreciation of the Indonesian rupiah exchange rate. Possibly market participants took advantage of relatively cheap blue chip stocks after the 1.3 percent drop on Friday (26/09) caused by negative market sentiments brought about by the parliament’s passing of a bill which abolishes direct voting of regional leaders. Foreign investors recorded net selling of IDR 542.4 billion.

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In line with the trend on other Asian stock indices, the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) fell on Monday (22/09) amid profit taking after three days of gains. Not even the appreciating rupiah exchange rate and net buying of foreign investors (IDR 26.6 billion) were able to push Indonesia’s index into the green zone. The IHSG declined 0.15 percent to 5,219.80 points. All sectors on the Indonesia Stock Exchange (IDX) fell except for the consumer goods and finance sectors.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) closed 1.12 percent higher on Wednesday (17/09) supported by Tuesday’s positive stock indices on Wall Street as well as speculation that the US Federal Reserve will not raise its key interest rate yet. Today (17/09), the Federal Reserve will conclude its Federal Open Market Committee (FOMC) meeting. Lastly, after weak economic data, it was reported that China’s central bank (PBOC) injected USD $82 billion into the country's five largest banks.

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Stock markets in the Asia Pacific were down on Tuesday (16/09) as investors are awaiting the results of the Federal Open Market Committee (FOMC) today (Wednesday 17/09) and are focused on the condition of the Chinese economy. Moreover, investors were disappointed to hear that next Indonesian President Joko Widodo (Jokowi) will appoint 16 party politicians to lead ministries in his cabinet (which is in contrast with his initial plan to appoint technocrats). Lastly, the Indonesian rupiah exchange continued to depreciate.

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The Indonesian rupiah exchange rate depreciated 0.54 percent to IDR 11,822 per US dollar in the past week (based on the Bloomberg Dollar Index). Several internal and external factors influenced the currency’s performance over the past week, such as increased US dollar demand from local Indonesian companies, Bank Indonesia’s decision to leave the BI rate unchanged and the improving US economy. Lastly, the structural current account deficit (triggered by expensive oil imports) remains a problem for investors.

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The central bank of Indonesia (Bank Indonesia) kept its key interest rate (BI rate) at 7.50 percent for the tenth consecutive month as inflation is under control and well within the year-end target of the central bank (3.5-5.5 percent). The lending facility and deposit facility were kept at 7.50 percent and 5.75 percent, respectively, at Thursday’s Board of Governor’s Meeting (11/09). The central bank also expects that the current interest rate environment is capable of curbing the country’s wide current account deficit.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) declined 0.92 percent to 5,136.86 points on the last trading day of the week. Seven of the ten sectorial indices fell, led by the finance sector (-1.66 percent), followed by consumer goods (-1.50 percent) and manufacturing (-1.34 percent). The main reason for this poor performance is that investors are again looking at the true fundamentals of the Indonesian economy instead of optimism about Joko Widodo becoming Indonesia’s seventh president.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) rose 0.37 percent to 5,184.48 on Thursday’s trading day (28/08) on increased expectation that the transition from the Susilo Bambang Yudhoyono (SBY) government to the Joko “Jokowi” Widodo government will be smooth and efficient evidenced by the pair's meeting in Bali to discuss various matters regarding the transfer of power. For investors, this meeting led to increased optimism. Stocks in the property and miscellaneous sectors led the gain.

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