By the end of Friday's trading day (28/03), the Indonesian rupiah exchange rate appreciated 0.75 percent to IDR 11,361 per US dollar based on the Bloomberg Dollar Index. At the end of March 2014, the rupiah is still the best-performing Asian currency this year, outperforming 24 emerging-market currencies that are tracked by Bloomberg. Since 31 December 2013, the rupiah appreciated nearly seven percent against the US dollar as an easing current account deficit and slowing inflation triggered capital inflows into Southeast Asia's largest economy.
Today's strong performance of the rupiah was also due to speculation that China, the world's second-largest economy, will announce a stimulus policy to boost its slowing economy.
Indonesia's current account deficit, which probably formed the biggest concern of investors amid the looming end of the US Federal Reserve's quantitative easing program last year, eased from a record high of USD $9.9 billion in the second quarter of 2013, to USD $8.4 billion in the third quarter and to USD $4.0 billion in the last quarter of 2013 (which is considered a sustainable level). The government and central bank (Bank Indonesia) are eager to reduce the deficit further. The current account, which measures trade and financial flows including interest and dividend payments, is used by investors to assess a country's resilience to a crisis. Forecasts for February point to a small trade surplus.
Meanwhile, inflation, which accelerated to almost nine percent (year-on-year) in 2013 after the government had raised prices of subsidized fuels in June 2013, has slowed from 8.22 percent (yoy) in January 2014 to 7.75 percent (yoy) in February 2014. Inflation is expected to moderate further to 7.4 percent (yoy) in March 2014. Statistics Indonesia will release the March 2014 inflation rate as well as the February 2014 trade statistics on Tuesday 1 April 2014.
Another positive development is that Bank Indonesia's foreign exchange reserves stood at USD $102.7 billion at end-February 2014, a nine-month high and equivalent to 5.9 months of imports or 5.7 months of imports and servicing external debt, which is well above international adequacy standards of approximately three months of imports.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.29 percent on Friday (28/03) to IDR 11,404 per US dollar:
Since 17 March 2014, the rupiah has shown a slight depreciating trend as the Federal Reserve announced a more aggressive monetary tightening policy (involving possible interest rate hikes in 2015 and 2016 and further quantitative easing tapering). Moreover, Bank Indonesia has stated that it would not like to see a too strong rupiah yet as that will jeopardize the moderation of the country's current account deficit.
The benchmark stock index of Indonesia (Jakarta Composite Index or IHSG) gained 0.96 percent to 4,768.28 points on Friday (28/03).
On Monday 31 March 2014, Indonesia's financial markets will be closed due to the 'Nyepi' celebration, the new year for Balinese Hindus.