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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In 2013, domestic production of heavy equipment in Indonesia fell 30 percent to 6,127 units from the previous year as commodity prices (such as crude palm oil and coal) were still down. This made Indonesian miners reluctant to ramp up production figures, thus having less need to purchase heavy equipment. According to Pratjojo Dewo, Chairman of the Indonesian Heavy Equipment Association (Hinabi), demand for heavy equipment in Indonesia started falling at the end of 2012 and continued into 2013.

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Forecasts for economic growth in Indonesia in 2014 are still optimistic. The government of Indonesia targets a 6 percent growth rate, while the country's central bank (Bank Indonesia) expects GDP growth in the range of 5.8 to 6.2 percent. Although these forecasts clearly fall short of the target set in the country's National Medium Term Development Plan (RPJMN) - which mentions annual GDP growth of between 6.3 and 6.8 percent - the forecasts are still rather positive given the global uncertain and volatile economic context in recent years.

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Both the rupiah exchange rate and the Jakarta Composite Index strengthened significantly on Monday's trading day (13/01) after the government introduced a milder version of its mineral ore export ban on Sunday (12/01). Full implementation of the ban would have burdened the country's already wide current account deficit. The ban immediately pushed up the nickel and copper prices today. The central bank's Jakarta Interbank Spot Dollar Rate (JISDOR) rose 1.75 percent to IDR 12,047 per US dollar on Monday (13/01).

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The central bank of Indonesia (Bank Indonesia) expects that credit growth in Southeast Asia’s largest economy will not exceed 20 percent (year on year) by the end of December 2013. Deputy Governor of Bank Indonesia, Halim Alamsyah, stated that credit growth is likely to slow to between 15 and 17 percent (yoy) in 2013 (based on a fixed rupiah exchange rate). Credit growth especially slowed in Indonesia’s consumption and construction sectors; a trend which is expected to continue in 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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Indonesia's central bank (Bank Indonesia) kept its benchmark interest rate (known as the BI rate) at 7.50 percent in today's Board of Governor's meeting (09/01). The institution decided not to change its interest rate because it estimates that the inflation target for 2014 is not in jeopardy (4.5 percent) while Indonesia's economic growth prospects for 2014 and 2015 remain unchanged. Also the overnight lending facility as well as deposit facility rate (Fasbi) were kept at 7.50 percent and 5.75 percent respectively.

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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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Stock markets in Asia are mixed, yet tepid on Friday (16/12) after the US Federal Reserve raised its interest rate regime for the second time in a decade on Wednesday (14/12). Although the Fed's move was widely anticipated (and therefore already "priced in" to a high degree) it still resulted in some capital outflows from Asia's stock markets on Thursday (13/12). Japan, as usual, is the notable exception as US dollar strength (or yen weakness) makes Japan's export-oriented stocks more attractive.

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Indonesian President Joko Widodo said market participants should reduce their focus on the US dollar as benchmark for Indonesia's rupiah currency. Instead of the US dollar, it is better to use China's renminbi, the European Union's euro, or Japan's yen as a benchmark for the rupiah as these rates better reflect the fundamentals of Southeast Asia's largest economy. The rupiah has come under pressure against the US dollar after Donald Trump's victory in the 2016 US presidential election.

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The Bank of Indonesia recently resorted to a sudden cut in interest rate (by 25 bps to 4.75 percent) at its 20th October 2016 meeting. This followed a 25 bps reduction in September and thus this is the sixth time this year that the Indonesian central bank has elected to loosen monetary policy.

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Indonesia's benchmark Jakarta Composite Index experienced another tough day on Monday (14/11). After Indonesian stocks plunged 4.01 percent on Friday, stocks fell another 2.2 percent today. Not only Indonesia, but most Asian markets are hit by the selloff, particularly the emerging markets of Southeast Asia. Investors are re-evaluating their emerging market assets now Donald Trump has been elected the next US president (and who can rely on a Republican-controlled US Congress). To make matters worse, current uncertainty is expected to persist in the next couple of months.

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Bank Indonesia (BI) is the central bank of the Republic of Indonesia, and was known as "De Javasche bank" or "The Java Bank" in the colonial period.  Bank Indonesia was founded on 1 July 1953 from the nationalization of De Javasche Bank. As an independent state institution, Bank Indonesia is fully autonomous in formulating and implementing each of its assumed tasks and most policy goals tend to center around the ability to stabilize prices in the economy.

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Asian stocks, including Indonesia's benchmark Jakarta Composite Index, continue their persistent slide on Friday (04/11) ahead of the US presidential election on Tuesday 8 November 2016. By 10:45 am local Jakarta time, Indonesian stocks were down 0.29 percent to 5,314.00 points, while the rupiah had depreciated 0.14 percent to IDR 13,093 per US dollar (Bloomberg Dollar Index). Besides the too-close-to-call US election, investors are also keeping an eye on the mass demonstration in Jakarta today.

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The central bank of Indonesia (Bank Indonesia) has become slightly less optimistic about Indonesia's economic growth in the third quarter of 2016. Bank Indonesia revised down its growth projection to below the 5 percent (y/y) mark for Q3-2016 (from an earlier forecast of 5.2 percent). However, the lender of last resort still expects to see a better performance compared to the 4.73 percent (y/y) pace posted in Q3-2015. Meanwhile, low inflation and a strong rupiah could result in another interest rate cut in Southeast Asia's largest economy.

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Packaged food producer Indofood CBP Sukses Makmur, subsidiary of Indofood Sukses Makmur, is expected to see rising profit in the second half of 2016 on the back of lower prices of raw materials (particularly wheat flour, the key ingredient for instant noodles), the stronger rupiah and improved purchasing power of Indonesia's consumer force. Meanwhile, the company may manage to curb losses that originate from the beverage segment. Indofood CBP Sukses Makmur has 6 business segments: noodles, dairy, snack foods, food seasoning, nutrition and special food products, and beverages.

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The central bank of Indonesia (Bank Indonesia) has made some important decisions under the current Governor Agus Martowardojo. Here, Bank Indonesia has been directed toward achieving the responsibility of making financial decisions that promote consumer price stability over the long-term. This has resulted in widespread gains in the rupiah against a basket of world currencies -- including the US dollar. But recent rate cuts now have the potential to reverse these broader trends.

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Many things happened this week. A devastating terror attack in Nice (France) killed at least 84 people, while - at the time of writing - a coup attempt occurred in Turkey (that seems to have failed). However, these events have little impact on the performance of global stocks and currencies (with the obvious exception of the Turkish lira). Wall Street touched record highs, while Indonesian stocks rose to a 13-month high and the Indonesian rupiah strengthened to a four-month high. Lets take a closer look at the performance of these markets over the past week.

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