The central bank of Indonesia (Bank Indonesia) is expected to leave its interest rate regime unchanged at Thursday’s Board of Governor’s meeting. Currently, Bank Indonesia’s key interest rate (BI rate) stands at 7.50 percent, the overnight deposit facility at 5.50 percent, and the lending facility rate at 8.00 percent. The central bank seems committed to this relatively high interest rate environment as the country’s inflation accelerated to 7.15 percent (y/y) in May, while the rupiah touched a 17-year low on 9 June 2015.

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In line with the performance of most other stock indices in Asia today (15/06), Indonesia’s benchmark Jakarta Composite Index (IHSG) fell over one percent in the first trading session. Primary reasons for this weak performance are concerns about stalled negotiations between Greece and its Eurozone creditors. Negotiations broke down without a deal on the bailout aid causing raising worries about a Greek default on its debt (a payment is due at the end of this month) as well as a Greek exit from the Eurozone (“Grexit”).

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Immediately after the opening of trade on Wednesday (10/06), Indonesian stocks rebounded sharply. Yesterday, Indonesia’s benchmark stock index (Jakarta Composite Index) had fallen 2.30 percent due to worries about looming higher US interest rates later this year, the Greek debt crisis in the Eurozone, heavy rupiah depreciation, and weak domestic macroeconomic data (such as Indonesia’s high inflation, disappointing Q1-2015 economic growth, the still wide current account deficit, and the central bank’s falling forex reserves).

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Indonesian stocks declined more than expected during the first trading session on Tuesday (09/06). The benchmark Jakarta Composite Index plunged 3.12 percent to 4,858.31 points amid heightened expectation of a US interest rate hike as well as worries about the Greek debt situation in the Eurozone. The performance of other Asian stock indices was mixed on Tuesday morning with Shanghai, Singapore and South Korea showing modest gains, while New Zealand, Hong Kong, Malaysia and Taiwan were down marginally.

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Indonesia's central bank (Bank Indonesia) is well aware of the continuation of the "currency war" as a side-effect of further monetary tightening in the USA. Bank Indonesia Governor Agus Martowardojo said on Monday (08/06), quoted by state news agency Antara, that he sees a currency war continuing over the next three years provided that the Federal Reserve starts to tighten its monetary approach gradually. Markets expect the Fed to raise US interest rates in September 2015.

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Indonesian stocks and the rupiah are experiencing severe pressures at the start of the new trading week. Indonesia’s benchmark stock index (Jakarta Composite Index) declined 1.68 percent to 5,014.99 points (a seven-month low), while the rupiah depreciated 0.71 percent to IDR 13,385 per US dollar according to the Bloomberg Dollar Index on Monday (08/06). As such, the rupiah extended its record-low closing in the post Asian Financial Crisis era. Indonesian stocks and the rupiah are the worst performing Asian assets.

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The Indonesian rupiah continues to be a cause for concern as the currency immediately depreciated heavily after trading opened on Monday (08/06). Based on the Bloomberg Dollar Index, the rupiah hit a new record-low of IDR 13,382 per US dollar in the post Asian Financial Crisis era at 9:10 am. Due to a lack of domestic and international positive sentiments only central bank intervention can support the country's ailing currency. Meanwhile, Indonesian stocks followed suit by declining 0.70 percent shortly after opening.

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The Indonesian rupiah continued to set a new record-low in the post Asian Financial Crisis era. Based on the Bloomberg Dollar Index, the rupiah depreciated 0.07 percent to IDR 13,290 per US dollar on Friday (05/06), the weakest level since 1998. A number of factors are responsible for this weak performance. These include higher bond yields, US dollar demand due to dividend repatriation and debt repayment, Indonesia’s high inflation, uncertainty about the Greek debt crisis and looming higher US interest rates.

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As the Indonesian rupiah continued to depreciate on Thursday (04/06), touching a 17-year low, a central bank official tried to ease concerns by stating that Bank Indonesia is always in the foreign exchange and bond markets to monitor movements and ease volatility. On Thursday morning the bond yield, which has been rising since Friday (29/05), was 8.198 percent. Based on the Bloomberg Dollar Index, Indonesia's rupiah had depreciated 0.11 percent to IDR 13,245 by 11:10 am local Jakarta time.

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In line with other stock indices in Southeast Asia, Indonesia’s benchmark stock index (Jakarta Composite Index) has been weakening since the start of trading on Wednesday (03/06). Yesterday’s weakening indices on Wall Street, concern about rising bond yields, worries about the possibility of a default by debt-ridden Greece, and weak macroeconomic data from Indonesia have all contributed to the negative performance of Indonesian stocks so far today. By 11:15 am local time, the Jakarta Composite Index had fallen 1.42 percent.

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Indonesia's benchmark stock index (IHSG) extended its downward movement on Monday (23/09) as investors continued to look for profits after the index had risen sharply following the announcement that the US quantitative easing program will not be ended yet. Pressures on the IHSG were intensified by the depreciating rupiah and the weakening of Hong Kong's Hang Seng Index (which was partly brought on by a typhoon). Despite foreign investors being net buyers of Indonesian stocks, the IHSG fell 0.46 percent to 4,562.86 points.

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On Thursday (19/09), most currencies and stock indices outside the USA were bullish after the Federal Reserve decided to continue its massive monthly USD $85 billion bond buying program. Today (20/09), Asian currencies and stock indices took the foot off the gas as many investors sought to cash in on yesterday's gains. The MSCI Asia Pacific was still able to rise slightly (0.1 percent) after jumping 2.2 percent yesterday, but Indonesia's benchmark stock index (IHSG) plunged 1.86 percent (after gaining 4.65 percent yesterday).

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Contrary to the expectation of most analysts, the Federal Reserve decided to continue its monthly USD $85 billion bond-buying program, known as quantitative easing, and retained the low interest rate of 0.25 percent. Although coming as a surprise, the news was well-received by the investor community all around the world, who were eager and confident to purchase stocks. The benchmark stock index of Indonesia, IHSG, felt this impact too and rose 4.65 percent to 4,670.73 points.

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Market participants are waiting for the outcome of the Federal Reserve's FOMC meeting, which will deal with the future of the quantitative easing program. The wait and see attitude of investors made the benchmark index of Indonesia (IHSG) fall 1.20 percent to 4,463.25 points. Few big cap stocks were able to rise and although some second liners were up, it was not enough to push the IHSG into the green zone. The rupiah continued to weaken and foreign investors were again mostly selling their Indonesian assets.

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Investors all around the world are in anticipation of the Federal Reserve's decision to scale back the monthly USD $85 billion bond-buying program known as quantitative easing (QE3). If indeed scaled back, then another important question remains: how much will the bond-buying program be toned down? Today (18/09), is the last day of the Fed's FOMC meeting in which these decisions are made. The market expects no drastic end to the program, instead a gradual toning down (between USD $10 to $20 billion) is anticipated.

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After it was reported that Garuda Indonesia, Indonesia's state-controlled national air carrier, postponed its rights issue, the company stated that it highly doubts an initial public offering (IPO) of its subsidiary Garuda Maintenance Facility (GMF) AeroAsia on the Indonesia Stock Exchange (IDX) in 2013. The reason for this postponement is current lingering uncertainty that plagues emerging markets, including Indonesia, since May 2013. Uncertainty about the future of the Federal Reserve's quantitative easing program led to a large outflow of foreign funds.

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After a strong performance yesterday, the Jakarta Composite Index (IHSG) fell 0.10 percent to 4,517.62 points on Tuesday (17/09). Part of the investor community grabbed their chance to engage in profit taking after yesterday's gain but most investors are careful and reluctant to make any major decision prior to the result of the Federal Reserve's FOMC meeting (17-18 September). It is expected that after this meeting there will be more clarity about the future of the Fed's quantitative easing program.

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Rising indices on Wall Street at the end of last week were a major factor behind rising stock indices in Asia, including Indonesia's benchmark stock index (IHSG), on Monday (16/09). For market players this development was a sign to enter the market. Moreover, expectation has emerged that the Federal Reserve will not take any drastic decisions in the FOMC meeting (on 17-18 September) regarding its quantitative easing program. This expectation has calmed down markets. Indonesia's IHSG rose 3.35 percent to 4,522.54 points.

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Last week, Indonesia's benchmark stock index (IHSG) climbed 7.3 percent to end at 4,375.53 on Friday (13/09). This growth is remarkable as it remains unknown what the Federal Reserve will do with its quantitative easing program (QE3). The next Fed meeting - scheduled for 17-18 September - is expected to provide more clarity regarding this matter. Positive sentiments that lifted the IHSG were Indonesia's slightly increased foreign exchange reserves, its stable rupiah after another BI rate hike, and the Bilateral Swap Deals (BSA) with Japan and China.

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Despite concerns that Indonesia's benchmark stock index (IHSG) would weaken on Thursday's trading day (12/09), the index ended 0.17 percent up to 4,356.61 points. Indices on Wall Street and in Asia impacted positively on the IHSG and kept foreign investors increasing their stock portfolios in Indonesia. Moreover, the Bank Indonesia's decision to raise the country's benchmark interest rate (BI rate) by 25 basis points to 7.25 percent was generally well-received by investors. Banking stocks helped to support the IHSG.

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