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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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the May 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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As the market already expected that Indonesia’s benchmark interest rate (BI rate) would be kept at 7.50 percent in June 2014, the Indonesian rupiah exchange rate did not undergo any significant fluctuations on Friday’s trading day. Based on the Bloomberg Dollar Index, the currency had depreciated 0.05 percent to IDR 11,796 per US dollar by 16:25pm local Jakarta time. The US dollar had to cope with some pressures due to US retail sales (rising only +0.3 percent in May 2014) and weaker US jobless claims data.

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On Thursday 12 June 2014 it was decided at the central bank’s Board of Governors’ Meeting to maintain the country’s benchmark interest rate (BI rate) at 7.50 percent, with the Lending Facility rate and Deposit Facility rate held at 7.50 percent and 5.75 percent, respectively. This decision is consistent with ongoing efforts to steer inflation back towards its target corridor of 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce Indonesia’s current account deficit to a more sustainable level.

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Although at the end of Wednesday’s trading day (11/06) Indonesia’s benchmark stock index (known as the Jakarta Composite Index or IHSG) was up, the index had been moving in the red zone during most of the day. Moreover, the index did not get support from the Indonesia rupiah exchange rate nor did it get support from Asian stock indices which tended to decline after yesterday’s weakening indices on Wall Street. Fortunately, foreign investors recorded net buying, thus contributing to the 0.52 percent growth of the IHSG to 4,971.95 points.

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The Indonesian rupiah exchange rate appreciated slightly on Wednesday (11/06). According to the Bloomberg Dollar Index, the currency of Southeast Asia’s largest economy appreciated 0.04 percent to IDR 11,810 per US dollar. Reuters reported that the euro zone's monetary easing in combination with the recent improvement in China's economy offset the impact of higher US yields on Asia. However, investors are still waiting for several data, including the BI interest rate, the Eurozone’s industrial production, and US retail sales.

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Just as unexpected as yesterday when the benchmark stock index of Indonesia (known as Jakarta Composite Index or IHSG) fell 1.06 percent amid positive domestic and international circumstances, the IHSG made a surprise rebound on Tuesday’s trading day. Yesterday’s fall was exorbitant and unfounded and today market participants made up for that performance by accumulating stocks that had lost value. As a result the IHSG gained 1.25 percent to 4,946.09 points on Tuesday (10/06).

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Contrary to most Asian stock indices which were positively influenced by Japan’s higher economic growth as well as rising indices on Wall Street last Friday (06/06), the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) fell considerably on Monday (09/06). Not even the appreciating Indonesian rupiah exchange rate could push the index back into the green zone. At the end of Monday’s trading day, the Jakarta Composite Index declined 1.06 percent to 4,885.08 points.

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Car sales in Indonesia declined 8 percent to 98,198 units in May 2014 from 106,811 units in the previous month. The Indonesian Automotive Industry Association (Gaikindo) said that the decline was the direct consequence of several public holidays (International Labour Day and the commemorations of Buddha’s birthday as well as ascensions of Prophet Muhammad and Jesus Christ). These holidays caused a lower car production rate and a reduced number of car deliveries to wholesale dealers.

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It was interesting to follow the performance of the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) on Thursday (05/06) as it managed to enter the green zone just minutes ahead of closing. Most of the trading day, the index had been in the red zone as Asian stock indices were mostly down on concerns about economic growth in China, the world's second largest economy. Furthermore, investors are still cautiously following the recent depreciating trend of the Indonesian rupiah.

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The Indonesian rupiah exchange rate appreciated 0.25 percent to IDR 11,860 per US dollar according to the Bloomberg Dollar Index on Thursday (05/06). However, this is not expected to be the start of an appreciating trend for the currency as there are still various domestic and international factors that place pressure on the rupiah. Contrary to the Bloomberg Index, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.54 percent to IDR 11,874 against the US dollar today.

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