The Indonesia rupiah exchange rate appreciated slightly on Tuesday (02/12). By 12:50 pm local Jakarta time, the currency had appreciated 0.03 percent to 12,277 per US dollar according to the Bloomberg Dollar Index. Yesterday, Indonesia’s currency had depreciated to the lowest level since January 2014 after official government data showed that inflation had accelerated sharply, while exports contracted more than expected, implying that the country’s wide current account deficit remains troublesome.
Data released by Statistics Indonesia (BPS) on Monday (01/12) showed that Indonesia’s November inflation pace accelerated to 6.23 percent year-on-year (y/y) after higher prices for subsidized fuels impacted on transportation and food prices in Southeast Asia’s largest economy.
Meanwhile, both Indonesia’s exports and imports fell in October 2014 leading to a small surplus of USD $0.02 billion. Exports declined 2.21 percent (y/y) in October, which was much more than previous projections resulting in concerns that the current account deficit of Indonesia will not improve markedly this year, particularly considering that economic growth in China, one of Indonesia’s main trading partners, has slowed. In the third quarter of 2014, Indonesia’s current account deficit narrowed to 3.1 percent of gross domestic product (GDP) from 4.27 percent of GDP in the previous quarter. However, this deficit is still unsustainable and causes great pressure on the value of the rupiah while making the country highly vulnerable to capital outflows in times of global shocks (such as looming higher interest rates in the USA). On the other hand, Indonesia’s trade balance is expected to feel the positive impact of current low prices for global oil as well as the recent subsidized fuel price hike in Indonesia as this should curtail the value of Indonesian imports.
Lastly, manufacturing activity in Indonesia contracted to a record low at 48.0 in November 2014 (HSBC Markit Purchasing Managers’ Index) while manufacturing forecasts for the near future are not too positive.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.09 percent to IDR 12,276 per US dollar on Tuesday (02/12).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Meanwhile, Indonesia’s benchmark stock index (Jakarta Composite Index) was up 0.44 percent in the first trading session on Tuesday (02/12).