The International Monetary Fund (IMF) is optimistic about economic growth of Indonesia in the foreseeable future. In its latest report the Washington-based institution says Indonesia's solid economic policies and increased household consumption support strong growth. The stronger rupiah and low inflation have caused people's purchasing power to strengthen. This is a major positive boost for the economy as household consumption accounts for more than 55 percent of total economic growth in Southeast Asia's largest economy.

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The benchmark Jakarta Composite Index rose 0.13 percent to 5,360.77 points on Friday (03/02), while the Indonesian rupiah appreciated 0.06 percent to IDR 13,343 per US dollar (Bloomberg Dollar Index). This slight growth was in line with the performance of most global stock markets on Friday after Wall Street ended little changed on the preceding trading day.

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The Indonesian rupiah is appreciating sharply on Thursday (05/01) as the US dollar retreats from its (near) 14-year peak against a basket of major global currencies ahead of the release of the US Federal Reserve's December policy meeting minutes. Based on the Bloomberg Dollar Index, the rupiah had strengthened 0.83 percent to IDR 13,328 per US dollar by 14:00 pm local Jakarta time on Thursday (05/01). Particularly the unexpected fall of the US dollar against China's yuan spooks market players.

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When on Friday afternoon (30 December 2016) the Indonesia Stock Exchange (IDX) closed its doors it effectively brought the year 2016 to an end in terms of stock trading on the local bourse. On Friday Indonesia's benchmark Jakarta Composite Index fell 0.11 percent to 5,296.71 points after two days of impressive gains. However, when looking at full-year 2016 the Jakarta Composite Index climbed 15.32 percent, hence being the second-best performing (national) benchmark stock index (after Thailand) in the Southeast Asian region in 2016.

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On the last trading day before the Christmas break, Indonesia's benchmark Jakarta Composite Index fell for the ninth straight day, the longest losing streak since August 2005. On Friday (23/12) the index fell 0.30 percent to 5,027.70 points. The performance of Indonesian stocks was in line with other markets in Asia. Ahead of Christmas and New Year festivities, trade volume is low as investors are taking a break. Meanwhile, there are no positive sentiments stemming from the Indonesian market.

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As we approach the year-end, and without the presence of positive triggers, investors seem to engage in profit-taking. Therefore, Indonesia's benchmark Jakarta Composite Index now extended its losing streak to seven straight sessions. Indonesian stocks fell 0.99 percent to 5,111.39 points on Wednesday (21/12), a decline led by consumer staples and financial shares, while the Indonesian rupiah depreciated 0.16 percent to IDR 13,459 per US dollar (Bloomberg Dollar Index). The Federal Reserve's recent rate hike still seems to overshadow global investor sentiment.

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The Federal Reserve decided - in line with expectations - to raise its benchmark Fed Funds Rate by 0.25 percent to the range of 0.50 - 0.75 percent, exactly one year after its first rate hike (in a decade). Furthermore, the Fed Chair Janet Yellen also indicated it sees three more interest rate hikes in 2017. This is a bit more hawkish than markets expected. Tighter monetary policy in the USA is required as the US labor market and growth in household spending improves. Inflation has also improved but remains below the Fed's 2 percent (y/y) target. Business investment, however, remains soft.

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The central bank of Indonesia (Bank Indonesia) announced that the country's foreign exchange reserves fell to USD $111.5 billion at the end of November 2016, from USD $115.0 billion in the preceding month. The USD $3.5 billion decline was caused by Bank Indonesia's efforts to stabilize the rupiah exchange rate as well as the government's external debt repayments. Despite the decline, Bank Indonesia regards the current level of forex reserves as healthy.

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The Indonesian rupiah has been appreciated significantly over the past two days versus the US dollar. By 12:00 noon local Jakarta time on Wednesday (07/12), Indonesia's currency had strengthened 0.29 percent to IDR 13,331 per US dollar (based on the Bloomberg Dollar Index). Meanwhile, Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) appreciated 0.51 percent to IDR 13,336 per US dollar today. Lets zoom in on this performance.

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Contrary to most other Asian stock indices, Indonesia's benchmark Jakarta Composite Index opened in the green zone on Monday morning (05/12). While, most markets are plagued by the outcome of Italy's referendum on Sunday (and Italian Prime Minister Matteo Renzi announcing his resignation), Indonesian stocks still seem to continue with the relief rally after the peaceful anti-Ahok demonstration on Friday (02/12). However, rupiah weakness, particularly as the US Federal Reserve may raise rates can limit the rise of local stocks.

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Indonesia's main stock index (IHSG) was not able to continue yesterday's rise as investors, particularly domestic investors, engaged in profit taking. Foreign investors, who were net buyers of Indonesian assets, were not able to guide the IHSG to positive territory. Mixed Asian stock indices, responding to weak Chinese data, did not support Indonesia's index. Moreover, market participants expect that the rupiah will continue its weakening trend and have begun speculating whether the benchmark interest rate (BI rate) will be raised again.

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Yesterday's rising indices on Wall Street, high expectations of companies' financial reports and positive statements regarding economic growth in China resulted in a good day at the Indonesia Stock Exchange (IDX). Indonesia's main stock index, the IHSG, rose 1.88 percent to 4,767.16 on Tuesday (23/07), even though technical indicators seemed to predict a weakening of the index. Also the continued fall of the Indonesian rupiah did not turn investors away from the market. In fact, foreign investors were net buyers of Indonesian stocks.

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As I wrote before, profit taking in combination with mixed movements of global stock indices resulted in the limited movement of Indonesia's main stock index (IHSG) on Monday (22/07). The IHSG was corrected 0.96 percent to 4,678.98. All of the sectoral indices weakened, except for the plantation and mining sectors. As there were no positive news publications that would make investors buy assets, they decided to engage in profit taking after the IHSG had risen for five consecutive days.

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The Indonesian rupiah (IDR) is experiencing one of its worst losing streaks in a decade. On Friday (19/07), the currency weakened to IDR 10,070 against the US dollar, which implies a devaluation of 4.14% in 2013 so far. The central bank of Indonesia, Bank Indonesia, does all it can to support the currency: the country's lender of last resort supplies dollars to the market triggering the reduction of foreign reserves from USD $105 million at end-May to $98 million at end-June, and raised its benchmark interest rate (BI Rate) by 50 bps to 6.50%.

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Indonesia's main stock index (IHSG) went up 0.89 percent to 4,720.44 on Thursday (18/07). The index was supported by developments in the United States. On Wednesday (17/07), Ben Bernanke spoke to the US Congress and said that the Federal Reserve is likely to continue its bond-buying program in 2013 and may gradually withdraw the quantitative easing program in 2014. But only if economic recovery of the US provides the good context. This message supported the IHSG although foreign investors continued to record a net sale.

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Amid widespread profit taking, Indonesia's main stock index (IHSG) was able to post another day of limited growth on Tuesday (16/07). Asian stock indices, including the IHSG, were supported by rising American stock indices on Monday (15/07). Investors seem to be confident that Q2-2013 results of various Indonesian companies are positive and therefore engaged in stock trading although foreign investors were still mostly selling their Indonesian assets. At the end of today's trading day, the IHSG rose 0.18 percent to 4,644.04.

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After finishing last week with three consecutive days of gains, Indonesia's main stock index (IHSG) reached up to 4,633.11. However, its movement is still rather volatile. Property, finance and consumption stocks were sold by investors after seeing the benchmark interest rate raised by Bank Indonesia (by 50 bps to 6.50 percent) on Thursday (11/07), while metal stocks formed the main supporter of the index at the end of the week. Trading volume in the regular market hit 5.2 trillion and foreigners recorded net purchases of IDR 288 billion.

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Indonesia's main stock index (IHSG) was able to continue its rise on Thursday (11/07) despite mixed markets in the United States and Europe, that were waiting for the release of the Federal Reserve minutes, on the previous day. The minutes and Ben Bernanke's speech indicate that the bond-buying program will be continued for a while and this made investors decide to buy Indonesian assets, particularly large cap stocks such as Unilever Indonesia, Bank Mandiri and Indocement Tunggal Prakarsa.

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Today, Bank Indonesia surprised many analysts and investors by raising its benchmark interest rate by 50 bps to 6.50 percent. Indonesia's central bank assessed that this measure is the correct one with regard to supporting the IDR rupiah (which is one of the worst Asian currencies against the US dollar this year) and to fight higher inflation after the government decided to cut fuel subsidies in June. It expects inflation to peak in July at about 2.3 percent (month to month) but to moderate soon afterwards.

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Indonesia's central bank (Bank Indonesia) expects that economic growth of Indonesia in 2013 will not meet the government's target as has been set in the revised State Budget (APNB-P). Last month, both government and parliament of Indonesia agreed on a revised GDP growth assumption of 6.3 percent. However, Bank Indonesia believes that, due to slowing domestic consumption and investments in the current global economic context, the growth is more likely to fall between 5.8 and 6.2 percent.

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