The foreign exchange reserves of Indonesia rose USD $2.4 billion to USD $104.5 billion in February 2016 according to a statement of Indonesia's central bank (Bank Indonesia). The lender of last resort attributed this forex growth to foreign exchange receipts from the oil & gas sector, foreign debt withdrawals, and the sale of foreign-denominated bonds (SBBI). These receipts were more than enough to cover for the use of foreign exchange for public foreign debt payments.

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The Indonesian rupiah is appreciating markedly on Wednesday (10/02). By 12:30 pm local Jakarta time, Indonesia's currency had appreciated 1.62 percent to IDR 13,391 per US dollar based on the Bloomberg Dollar Index, a three-month high. Today, most emerging currencies in Asia are appreciating against the US dollar ahead of Fed Chair Janet Yellen's testimony in US Congress this week. Other factors that support strong rupiah appreciation are speculation that Indonesia will attract investors due to accelerating domestic economic growth and the move of Japan's central bank to introduce negative interest rates.

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The central bank of Indonesia (Bank Indonesia) announced on Friday (05/02) that Indonesia's foreign exchange reserves declined USD $3.8 billion to USD $102.1 billion at the end of January 2016. This fall was caused by government (foreign) debt settlements as well as interest payments over global bonds. The central bank emphasized that the country's foreign exchange reserves are still at a safe level as they can adequately cover 7.5 months of imports or 7.2 months of imports and servicing of government external debt repayment, well above the global reserve standard at three months of imports.

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The Indonesian rupiah has been under pressure so far today (03/02) on concern that falling oil prices drag down other commodity prices, hence negatively affecting Indonesia's export performance. Yesterday, a global selloff in stocks occurred as oil prices were again touching the USD $30 per barrel mark. Emerging market currencies too are under pressure. The Indonesian rupiah had depreciated 0.79 percent to IDR 13,799 per US dollar (Bloomberg Dollar Index) by 12:55 pm local Jakarta time.

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The central bank of Indonesia (Bank Indonesia) announced that the country's foreign exchange reserves have risen considerably in December 2015. At the end of the last month of 2015 the foreign exchange assets stood at USD $105.9 billion, up from USD $100.2 billion in the preceding month. This is a remarkable result as the global and domestic economy is still plagued by uncertainty and volatile capital flows (in December the Federal Reserve finally raised its key Fed Fund Rate by 25 basis points).

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The Indonesian rupiah is strengthening remarkably against the US dollar on Monday (21/12) despite expectation that the rupiah will become the worst-performing Asian currency in 2016 on capital outflows (amid more US interest rate hikes planned for 2016), Indonesia's falling foreign exchange reserves, and persistent low commodity prices. Based on the Bloomberg Dollar Index the Indonesian rupiah had appreciated 1.13 percent to IDR 13,760 per US dollar by 14:20 pm local Jakarta time on Monday (21/12).

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Despite winter having arrived, global oil prices are still declining. Today (21/12), Brent crude prices plunged to the lowest level since 2004 on persistent concern about a global supply glut as the Energy Information Administration reported that US crude oil supplies rose 4.8 million barrels to 490.7 million in the second week of December, while the OPEC's production rate stood at 31.7 million barrels per day (bpd) in November 2015. Meanwhile, oil demand is expected to fall in 2016. For example, oil consumption in the USA is projected to fall to 1.2 million bpd next year, from 1.8 bpd in 2015.

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Stock indices in Southeast Asia plunged on Friday (18/12), led by benchmark indices in Thailand and Indonesia. These Asian markets followed the global correction that occurred after investors weighed in the possible impact of the Federal Reserve's interest rate hike. US and European stocks dropped on Thursday and Friday, while prices of oil and other commodities continued to slide. Indonesia's Jakarta Composite Index fell 1.92 percent to 4,468.65 points.

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The coal price will have serious difficulty to rise as long as crude oil prices remain low and China's economy remains in slowdown-mode. Weak global oil prices (expected to remain below USD $40 per barrel this month) - and the strong US dollar amid looming US monetary tightening - give a bad signal to other commodities, including coal, while the world's largest energy consumer China is struggling to combat its economic slowdown implying limited global coal demand.

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The Indonesian government will engage in front loading, issuing 61 percent of next year's total planned state bonds - worth IDR 532.4 trillion (approx. USD $38.6 billion) - in the first half of 2016. Proceeds are used to finance the 2016 State Budget. Earlier, on 2 December 2015, the government had already sold USD $3.5 billion worth of bonds to cover a shortfall in the 2016 State Budget, deliberately ahead of the possible US interest rate hike in mid-December (as this move is expected to reduce investor appetite for emerging market assets).

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The financial markets have had an interesting year in 2015, with several significant surprises seen in the major asset classes. On the whole, 2015 could probably be best described as a year of stabilizing with stocks and commodities holding mostly steady throughout the period. This has been largely true in the currency markets, as well. But there are some factors that are likely to influence trends for world currencies in new ways in 2016. Central banks in some regions will likely have significant influence in others, and investors will need to remain aware of the possibilities early in order to position for potential trend chances in critical areas.

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As Indonesia's inflation rate has eased to 6.25 percent (y/y) in October 2015 from 6.83 percent (y/y) in the previous month, and given that Indonesian inflation will ease more markedly in the last two months of 2015 as the impact of the subsidized fuel price hike in November 2014 will vanish, the central bank of Indonesia (Bank Indonesia) seems to have more scope to cut its current relatively high benchmark interest rate, hence giving rise to accelerated economic activity.

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For most of this year, the Indonesian rupiah has met selling pressure against the US Dollar. Year-to-date price activity in the USD/IDR shows a rise from below IDR 12,250 to new highs above IDR 13,330 per US dollar. For Indonesian export companies, this is great news as it means that their products will be cheaper for foreign consumers to buy. For the domestic economy, this creates a different set of implications as it also makes it less likely that foreign investors will be looking to buy into Indonesian assets.

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When we look at the long-term activity in the Indonesian rupiah, we have seen a surprising level of strength when viewing the activity seen in recent months. This has been surprising for a few different reasons, as this is not something that can be said for markets in emerging Asia as a whole. This essentially suggests that economic activity in the region has been somewhat disjointed and that trends visible in one country cannot necessarily be expected in another. But when we look at chart activity in the rupiah itself, we can see that the broader trends have started to change over the last two months.

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Over the last year, the Indonesian rupiah has been rising when compared to a wide variety of world currencies. Some of the more pronounced strength has been seen against the US dollar, which has been travelling in the opposite direction for most of the same period. To many investors that are focused on the currency markets, it might appear as though these two currencies are largely unrelated. But when we look at the trends that have been developing over the last year, it quickly becomes clear that this is just not the case.

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Over the past week, the Indonesian rupiah continued to appreciate against the US dollar. Based on the Bloomberg Dollar Index, the rupiah appreciated 0.07 percent to IDR 12,850 per US dollar on Friday (17/04). Only a month ago, investors and policymakers were alarmed when the rupiah touched IDR 13,245 per US dollar, a 17-year low. This column discusses the factors that caused the strengthening of the rupiah in recent weeks. However, amid looming further monetary tightening in the USA, this development should be short-term only.

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When we look at market activity in the Indonesian rupiah, some very clear trends have started to emerge. When viewed against the US dollar the rupiah has seen pronounced weakness over this time frame. Many investors have started to view this activity as overdone and we have started to see analyst forecasts calling for more strength in the rupiah over the next few months. But there are also arguments that can be made against this outlook and it will be important for those investing in Indonesian assets to understand some of these factors, so that proper positioning can be undertaken.

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The central bank of Indonesia (Bank Indonesia) stated that, besides global volatility caused by uncertainty about the timing of higher US interest rates, the rupiah has been - and remains - under pressure due to Indonesia’s increasing private sector debt and the wide current account deficit. Moreover, as subsidiaries of multinational companies in Indonesia tend to send back dividends to the foreign parent companies in the second quarter (implying rising US dollar demand), the rupiah is plagued by additional pressures up to June.

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Indonesia’s central bank (Bank Indonesia) decided to hold the country’s key interest rate (BI rate) at 7.50 percent, the deposit facility rate at 5.50 percent, and the lending facility rate at 8.00 percent at the Board of Governor’s Meeting conducted on Tuesday 17 March 2015. Bank Indonesia said that its decision is in line with its ongoing efforts to push inflation back to the target range of 4±1 percent for both 2015 and 2016, and to guide the country’s current account deficit towards a healthier level at 2.5-3 percent of GDP in the medium term.

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The Indonesian rupiah exchange rate continued to depreciate on Monday (02/03). According to the Bloomberg Dollar Index, Indonesia’s currency depreciated 0.30 percent to IDR 12,970 per US dollar, a six-year low. Apart from general bullish US dollar momentum in recent months (amid monetary tightening in the USA), the rupiah weakened due to Bank Indonesia’s signals that it tolerates a weaker currency in a move to boost exports (limiting the country’s current account deficit), and due to China’s interest rates cut.

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