The Indonesian rupiah exchange rate appreciated against the US dollar on Thursday (08/01) amid mostly strengthening Asian equity and currency markets as a number of positive market sentiments arose (specifically the release of the Federal Reserve’s December minutes). According to the Bloomberg Dollar Index, Indonesia’s rupiah appreciated 0.48 percent to IDR 12,674 per US dollar. Meanwhile, Indonesia’s benchmark Jakarta Composite (stock) Index was up 0.25 percent (5,221.89 points) at the end of today’s trading day.

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Indonesia’s rupiah exchange rate continued to depreciate on Wednesday (07/01). Based on the Bloomberg Dollar Index, the currency had depreciated 0.66 percent to IDR 12,731 per US dollar by 15:50 pm local Jakarta time amid prolonged weak global sentiments. Falling oil prices signal sluggish global economic growth - with the exception of the US economy which is showing structural recovery and thus fuels expectation of higher US interest rates - and speculation that Greece may exit the Eurozone.

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On 4 January 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 in the last seven days. Most of the topics involve economic matters such as updates on inflation, the trade balance, manufacturing, the rupiah exchange rate, poverty, an assessment of the IMF on Indonesia’s economic fundamentals, and more.

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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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On 21 December 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 matters such as the rupiah exchange rate performance, a palm oil update, Indonesia’s economic growth in 2015, an update on the tender for the Soekarno-Hatta Railway Project, and more.

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The Standard Chartered Bank expects the economy of Indonesia to accelerate slightly in 2015 compared to this year’s estimated performance. The bank forecasts a growth pace of 5.2 percent year-on-year (y/y) next year, up from 5.1 percent (y/y) in 2014. Standard Chartered Bank economist Eric Sugandi recently said that the Indonesian economy will be affected by two factors: the great rotation (capital outflows from emerging markets ahead of US interest rate hikes) and growth disparity (slowing growth or recession in China and Japan).

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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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The Indonesian rupiah exchange rate is heading for its biggest weekly decline since the second week of December 2013. According to the Bloomberg Dollar Index, the currency of Southeast Asia's largest economy had depreciated 0.36 percent to IDR 11,572 per US dollar by 2.30pm local Jakarta time on Friday (23/05). However, year to date, the rupiah is still among the best performing Asian emerging currencies against the greenback (+5.19 percent). What are the reasons that explain the rupiah's weak performance this week?

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Investors' appetite for mining and plantation stocks managed to support the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) on Thursday's trading day (22/05). After the recent decline of the IHSG, market participants continued to accumulate stocks that are considered cheap. Furthermore, indices on Wall Street on Wednesday were up and impacted positively on Asian indices on Thursday, thereby providing positive market sentiments for the IHSG.

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Although most Asian emerging currencies strengthened on Thursday (22/05) against the US dollar due to the preliminary HSBC Flash China Manufacturing Purchasing Managers' Index (PMI) recovering to 49.7 in May 2014 (from 48.1 one month earlier) and the Federal Reserve Minutes indicating that there will be no US interest rate hike soon, the Indonesian rupiah exchange rate continued to decline. Based on the Bloomberg Dollar Index, the currency had depreciated 0.19 percent to IDR 11,531 per US dollar by 5pm local Jakarta time.

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Although initially the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) declined shortly after the opening on Wednesday (21/05), during the remainder of the day it went up. This is a trend which we often detect: after a sharp fall we see a rebound on the following day as investors want to take advantage of 'cheap' stocks. However, the rebound was only limited as investors prefer to wait and see for further market sentiments first. The main positive factor today were rising Asian stock indices.

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The sharply depreciated Indonesian rupiah exchange rate in the second half of 2013 in combination with the decline in domestic oil lifting has led to a soaring of fuel subsidy spending in 2014. In the 2014 State Budget (APBN 2014), the ceiling of energy subsidy spending for 3-kg LPG and fuels was set at IDR 210.7 billion (USD $18.3 billion). However, in the 2014 Revised State Budget Draft, the government proposes to raise the subsidy ceiling to IDR 285 trillion (USD $24.8 billion), thus swelling IDR 74.3 trillion from the initial ceiling.

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Similar to when the market expects the release of positive companies' corporate earnings reports, the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) gained significantly at the start of today's trading day (19/05) as the market waited for the official declarations of the presidential and vice-presidential candidates that will participate in the presidential election that is scheduled for 9 July 2014. The two pairs that will compete are the Joko Widodo-Jusuf Kalla pair and the Prabowo Subianto-Hatta Rajasa pair.

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After a promising start of the day, the rupiah exchange rate and Indonesian stocks lost all of their earlier gains ahead of closing on Monday day (19/05). Around 10:00 local Jakarta time, the rupiah rate appreciated more than 0.60 percent to IDR 11,346 per US dollar on speculation that Jusuf Kalla would be nominated as Joko "Jokowi" Widodo's running mate in the presidential election (9 July 2014), backed by a coalition consisting of the PDI-P, NasDem, PKB and Hanura. After the official declaration, however, the currency lost all of its earlier gains.

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The week ended well for both the Indonesian rupiah exchange rate and the benchmark Jakarta Composite Index (IHSG). Based on the Bloomberg Dollar Index, the rupiah appreciated 0.30 percent to IDR 11,413 per US dollar at the end of Friday's trading day (16/05). Meanwhile, the IHSG surged 0.80 percent to finish just above the psychological level of 5,000 points. The good performance was supported by investors' positive response towards the latest political developments in Indonesia.

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The government of Indonesia will submit a new draft proposal for the 2014 Revised State Budget (APBN-P 2014) on 20 May 2014. Of the seven basic macroeconomic assumptions in the 2014 State Budget (APBN 2014), three assumptions are proposed to be revised. These involve general economic growth, the Indonesian rupiah exchange rate, and crude oil lifting. The government felt that the assumptions need a revision as results in the first quarter of 2014 have not been up to expectation.

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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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