The Indonesian rupiah exchange rate depreciated 0.14 percent to IDR 11,665 per US dollar on Tuesday (25/02) based on the Bloomberg Dollar Index. The currency's depreciation was due to US dollar demand from Indonesian importers while offshore funds engaged in profit taking as the rupiah is the best performer in February 2014 among 31 major currencies tracked by Bloomberg (against both the euro and US dollar). The rupiah is also the best-performing Asian currency this year so far.

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Amid an improving trade balance, Indonesia’s foreign exchange reserves rose to USD $100.7 billion at the end of January 2014, according to a press release of Indonesia's central bank (Bank Indonesia). Compared to December 2013, the reserves increased USD $1.3 billion. These reserves are sufficient to finance 5.7 months of imports or 5.6 months of imports and servicing of government external debt, which is well above the international standard of reserve adequacy at 3 months of imports.

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Indonesian stocks and the country's currency feel the negative impact of the further winding down of the Federal Reserve's bond-buying program (quantitative easing). Yesterday (29/01), it was announced that the Fed will cut the bond-buying program by USD $10 billion to USD $65 billion per month. Among market participants concern emerged about the stability of emerging economies amid the tapering as capital outflows are expected. After opening, the benchmark stock index of Indonesia (IHSG) immediately fell more than 1 percent.

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Asian stocks and currencies strengthened on Wednesday (29/01) after the central banks of Turkey and India tightened their monetary policies in order to attract capital inflows and restore investors' confidence. The central bank of Turkey raised its overnight lending rate aggresively from 7.75 percent to 12 percent on Tuesday (28/01); a measure which managed to calm down Asian markets. According to the Bloomberg Dollar Index, the Indonesia rupiah exchange rate appreciated 0.20 percent to IDR 12,166 per US dollar on Wednesday.

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On Tuesday (28/01), the Indonesia rupiah exchange rate shows a volatile performance. Around 15:30 local Jakarta time, Indonesia's currency appreciated 0.08 percent against the US dollar. Market participants are waiting for the outcome of the Federal Reserve's FOMC meeting held on 27-28 January 2014. Most analysts expect the Federal Reserve to quicken the winding down (tapering) of its quantitative easing program. This program caused a large capital inflow in emerging economies, including Indonesia, in recent years.

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The sharply depreciated Indonesia rupiah exchange rate in combination with the inability to raise domestic production of crude oil threatens to balloon government subsidy expenditure. Fuel subsidies may increase 20 percent to IDR 252 trillion (USD $20.8 billion) in 2014 as the rupiah currently has about 14 percent less value (based on the Bloomberg Dollar Index) than the value assumed in the 2014 State Budget (APBN 2014). The government assumed a rupiah rate of IDR 10,500 per US dollar in the APBN 2014.

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The performance of the Indonesia rupiah exchange rate on Friday morning (10/01) was rather stagnant against the US dollar (the latter's movement was mixed against currencies in the Asia-Pacific) although the rupiah was up 0.12 percent to IDR 12,178 per US dollar at 13:42 local Jakarta time based on the Bloomberg Dollar Index. Positive sentiments are caused by Indonesia's narrowing current account deficit (possibly less than 3 percent of GDP in Q4-2013) and rising foreign exchange reserves at end-December 2013.

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On Thursday (09/01), the US dollar appreciated after the release of the minutes of the FOMC’s December meeting as well as positive US employment data. The minutes show that Federal Reserve policy makers are confident that the economy is strong enough to start scaling back its quantitative easing program, although the minutes do not provide a clear schedule about the tapering. Yesterday (08/01), it was also released that private-sector payrolls increased by 238,000 positions in December 2013.

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The Indonesia rupiah exchange rate is moving sideways on Wednesday's trading day (08/01). At 13:00 local Jakarta time, the rupiah was down 0.02 percent to IDR 12,240 per US dollar based on the Bloomberg Dollar Index. This morning the US dollar slightly depreciated against most Asian currencies after the International Monetary Fund (IMF) said to plan to upgrade its forecast for global economic growth as the US economy improves. Yesterday, Indonesia held Asia's largest US dollar-denominated bonds since 1998.

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In line with most other Asia-Pacific currencies, the Indonesia rupiah exchange rate continued its depreciating trend against the US dollar on Tuesday morning (07/01). Market participants tend to avoid the rupiah and prefer to wait & see for international data first. For example, today's release of the minutes of the Federal Open Market Committee (FOMC). This will inform about the stance of Federal Reserve officials on the winding down of the quantitative easing program (planned for this January).

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In line with most other Asian emerging currencies, Indonesia’s rupiah exchange rate depreciated on Friday (28/11). Market players continue to buy US dollars amid falling oil prices. Japan’s yen even fell to a seven-year low against the US dollar after government data showed that household spending declined four percent (y/y) and inflation slowed in the world’s third-largest economy. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.22 percent to IDR 12,204 per US dollar by 15:35 pm local Jakarta time.

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After the currency of Japan (yen) had weakened to its lowest level in seven years against the US dollar on Tuesday (11/11), the currency rebounded today (12/11) as speculation spread that Japan’s Prime Minister Shinzo Abe is not considering to dissolve parliament and to postpone a planned sales-tax increase. Japan’s currency had gained 0.4 percent to 115.31 per US dollar at 9:02 am London time according to Bloomberg data (yesterday it had touched a seven-year low at 116.10 per US dollar).

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Although Indonesia’s September 2014 inflation (0.27 percent m/m) and appreciating rupiah exchange rate had a positive impact on the performance of Indonesia’s benchmark stock index (Jakarta Composite Index, abbreviated IHSG) on Wednesday (01/10), its gain was limited by declining indices on Wall Street on the previous day as well as Indonesia’s August trade deficit (USD $318.1 million), which resulted in foreign net selling of worth IDR 388 billion of Indonesian stocks. The IHSG climbed 0.06 percent to 5,140.91 points.

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The Indonesian rupiah exchange rate depreciated 0.54 percent to IDR 11,822 per US dollar in the past week (based on the Bloomberg Dollar Index). Several internal and external factors influenced the currency’s performance over the past week, such as increased US dollar demand from local Indonesian companies, Bank Indonesia’s decision to leave the BI rate unchanged and the improving US economy. Lastly, the structural current account deficit (triggered by expensive oil imports) remains a problem for investors.

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Contrary to the positive performance of the benchmark stock index of Indonesia on Monday’s trading day (01/09) and despite positive domestic economic data released by Statistics Indonesia, the Indonesian rupiah exchange rate depreciated 0.22 percent to IDR 11,716 per US dollar based on the Bloomberg Dollar Index on Monday (01/09). The main reason for the currency’s depreciation is the strengthening US dollar as US economic data are improving and inflation is slowing in the Eurozone.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) fell 0.14 percent to 5,198.90 points on the last trading day of the week, the first day of decline in five trading days, as investors engaged in profit taking after Indonesia’s Constitutional Court confirmed the official election result of the General Elections Commission (KPU) that announced Joko Widodo as winner of the July 2014 presidential election. Next week investors may continue profit taking as the index is still overbought.

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The Indonesian rupiah exchange rate depreciated 0.67 percent to IDR 11,665 per US dollar on Monday (14/07) according to the Bloomberg Dollar Index. Meanwhile, the benchmark stock exchange of Indonesia (Jakarta Composite Index) declined 0.23 percent to 5,021.06 points. The main reason for weakening markets in Indonesia is investors’ wait & see attitude ahead of the official result of Indonesia’s presidential election. On 22 July 2014, the General Elections Commission (KPU) will announce the winner of the election.

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The Indonesian rupiah exchange rate continued its recent depreciating trend on Wednesday (28/05). According to the Bloomberg Dollar Index, the currency had depreciated 0.46 percent to IDR 11,633 against the US dollar at the end of the trading day. The rupiah's performance is in line with the general trend in Asia where most currencies lost ground to the greenback on today's trading day. As various US economic data indicate a continued recovery of the US economy, the market expects more US monetary tightening.

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At the end of Friday’s trading day (02/05), the Indonesian rupiah exchange rate appreciated 0.32 percent to IDR 11,525 per US dollar based on the Bloomberg Dollar Index. The rupiah performed better than most of its regional emerging peers as inflation and trade data, which were released today by Statistics Indonesia, provided positive market sentiments. Indonesian inflation eased to 7.25 percent (year-on-year) in April 2014, from 7.32 percent a month earlier. Meanwhile, the country posted a trade surplus of USD $673 million in March 2014.

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Due to a lack of positive domestic and external sentiments, the Indonesian rupiah exchange rate has depreciated to a six-week low against the US dollar. Based on the Bloomberg Dollar Index, Indonesia's currency declined 0.66 percent to IDR 11,521 per US dollar by 16:22 local Jakarta time. In fact, several negative domestic sentiments are the reason behind the current depreciation. Firstly, revived concerns about Indonesia's current account deficit and, secondly, concerns about capital outflows due to dividend payments.

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