Most Asian stock markets were stronger on Wednesday, led by Japan's Nikkei 225 Index which rose 2.70 percent on expectation of further government stimulus measures. Meanwhile, Indonesia's benchmark Jakarta Composite Index rose 1.09 percent to 4,223.91 points supported by the region's rising stock indices as well as on the back of the second installment of Indonesia's economic policy package. Meanwhile, the rupiah appreciated 0.26 percent to IDR 14,653 per US dollar (Bloomberg Dollar Index).

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Indonesian stocks experienced a remarkable roller coaster ride on Tuesday (29/09). After opening the benchmark Jakarta Composite Index fell more than two percent to a near three-year low. However, the index managed to finish the trading day at 4,178.41 points, a 1.41 percent rise. Meanwhile, Indonesia's rupiah managed to curb losses. Based on the Bloomberg Dollar Index, the rupiah passed beyond the IDR 14,800 per US dollar level several times but at the end of the day it had only weakened 0.11 percent to IDR 14,691 per US dollar.

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In an effort to support the ailing Indonesian rupiah, state-owned energy company Pertamina will cut its foreign exchange purchases on the spot market by around 50 percent. Pertamina together with state utility firm Perusahaan Listrik Negara (PLN) account for about half of Indonesia's daily foreign exchange (forex) transactions as these companies require US dollars for fuel purchases and overseas debt settlements.

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Indonesia's benchmark stock index (Jakarta Composite Index) was down over 2 percent, touching a three-year low, while the rupiah weakened beyond the IDR 14,800 per US dollar level (Bloomberg Dollar Index) around 09:00 am local Jakarta time on Tuesday (29/09) as the global selloff persists. Investors are concerned about the economic conditions of China and the world, low commodity prices, while anticipating a Fed Fund Rate hike.

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Stock indices in Asia were mixed on the first trading day of the week. Indonesia’s benchmark Jakarta Composite Index plunged 2.11 percent to 4,120.50 points (a two-year low), while the rupiah (remarkably) appreciated 0.13 percent to IDR 14,674 per US dollar according to the Bloomberg Dollar Index. Meanwhile, European markets were down after opening on Monday (28/09). What influenced these markets today?

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Indonesia plans to cut taxes for local exporters in a bid to boost the country’s foreign exchange reserves, while supporting the rupiah, as part of its second policy package. Indonesia’s rupiah has depreciated 18.1 percent since the start of 2015 due to looming higher US interest rates, low commodity prices, and China’s yuan devaluation. The government now plans to cut income tax on interest that exporters earn when depositing their export proceeds in local banks. Currently, income tax on bank interest (from deposit accounts) stands at 20 percent.

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After opening on Monday (28/09) Indonesian stocks rapidly fell amid mixed Asian markets. The main factor that causes several Asian markets to fall is declining Chinese industrial profits (triggering concern about a deepening slowdown of the world’s second-largest economy). China’s industrial profits fell 8.8 percent in August, down from July’s 2.9 percent drop. By 09:50 am local Jakarta time, the benchmark Jakarta Composite Index was down 1.41 percent to 4,150.27 points.

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The central bank of Indonesia (Bank Indonesia) is set to announce the second installment of a policy package that aims at raising onshore US dollar supplies (and liquidity). As the rupiah has been the second worst-performing Asian emerging market currency (after Malaysia’s ringgit), having depreciated 18.1 percent against the US dollar so far in 2015, Indonesian policymakers are anxious to prop up the ailing currency in order to safeguard the country’s financial stability. Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) stood at IDR 14,690 per US dollar on Friday (25/09), a 17-year low.

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Stock markets in Asia were mixed on Friday (25/09) after Federal Reserve Chairwoman Janet Yellen said in a speech at the University of Massachusetts that the US central bank is still on track to raise interest rates before the year-end (provided no economic shocks take place as the move is data-dependent). After this looming hike, Yellen suggests to gradually tighten US monetary policy thereafter.

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In line with other Asian emerging markets and currencies, Indonesian stocks and the rupiah are weakening on Friday (25/09) after Federal Reserve Chairwoman Janet Yellen said during her speech at the University of Massachusetts that US interest rates are likely to be raised before the year-end, provided no economic shocks occur. Yellen stated that most FOMC participants agree on a Fed Fund Rate hike later this year, followed by gradual further monetary tightening thereafter.

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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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On Monday (14/04), the Indonesian rupiah exchange rate depreciated 0.23 percent to IDR 11,440 per US dollar according to the Bloomberg Dollar Index. This performance was in line with most other emerging Asian currencies, which weakened against the US dollar due to broad strength in the greenback as well as risk aversion. The rupiah - still the best performing emerging Asian currency so far this year - depreciated on dollar demand from local importers (while state-run banks were reported to engage in rupiah buying).

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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 March 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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The Indonesian rupiah exchange rate extends its depreciation on Friday (11/04) after market participants showed their concern about Indonesia's legislative election result on Wednesday (09/04). As the election did not result in a clear victory for the PDI-P (the main opposition party which intends to nominate popular Jakarta Governor Joko 'Jokowi' Widodo as presidential candidate), the fragmented outcome is expected to lead to continued political uncertainty ahead of Indonesia's presidential election on 9 July 2014.

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Most emerging market currencies, including the Indonesian rupiah exchange rate, appreciated against the US dollar on Tuesday (08/04) due to carry trade (meaning the selling of low-yield currencies for higher-yielding assets) and expected stimulus from China's government to boost its economy (Chinese shares in fact gained 2.2 percent on this stimulus speculation). The rupiah appreciated 0.14 percent to IDR 11,289 per US dollar based on the Bloomberg Dollar Index, partly due to variety of domestic factors.

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Indonesia's gross domestic product (GDP) growth is expected to move sideways in the first quarter of 2014. Finance Minister Chatib Basri forecasts a growth rate of between 5.7 and 5.8 percent, similar to the growth pace that was recorded in the fourth quarter of 2013 (5.78 percent). Based on data from Statistics Indonesia (BPS), economic growth in Indonesia has slowed since the second quarter of 2013. In Q2-2013, Indonesia's GDP expanded by 5.89 percent, thereby ending a ten-quarter streak of +6 percentage growth.

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The rate of inflation in March 2014 demonstrated that the ongoing downward trend persists. In the reporting month of March 2014, inflation was recorded at 0.08 percent (month-to-month) or 7.32 percent (year-on-year), down from the rates recorded in the previous two months at 1.07 percent (mtm) or 8.22 percent (yoy) in January and 0.26 percent (mtm) or 7.75 percent (yoy) in February. The declining inflation trend is further evidenced by a lower rate recorded in March 2014 than the historical average over the past six years at 0.24 percent (mtm).

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At 15:00 local Jakarta time on Tuesday (01/04), the Indonesian rupiah exchange rate as well as the country's benchmark stock index (known as the IHSG or Jakarta Composite Index) have shown a positive performance so far. Based on the Bloomberg Dollar Index, the rupiah appreciated 0.64 percent to IDR 11,288 per US dollar, while the IHSG climbed 2.15 percent to 4,871.38. A number of internal and external factors contributed to this remarkable performance today.

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The Indonesian rupiah exchange rate depreciated 0.31 percent to IDR 11,447 per US dollar on Thursday (27/03) based on the Bloomberg Dollar Index. The currency's strong performance in February and the first half of March, supported by Indonesia's easing current account deficit and inflation, has met resistance due to global concern about the aggressive US Federal Reserve monetary tightening (winding down its quantitative easing program by another chunk of USD $10 billion as well as possible US interest rate hikes in 2015 and 2016).

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On Wednesday (26/03), most emerging Asian currencies appreciated against the US dollar as the region's shares hit a two-week high on upbeat US economic data in combination with reduced concern over the crisis in Crimea (Ukraine). However, the Indonesian rupiah exchange rate was one of the exceptions to this trend on today's trading day. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.16 percent to IDR 11,412 at 16:15 local Jakarta time. Meanwhile, the Chinese yuan recovered some of its earlier losses.

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