Despite Crimea and Fed Concerns, Indonesian Rupiah up on Jokowi Effect
The Indonesian rupiah exchange rate continued its impressive rebound in 2014, supported by Indonesia's improving economic fundamentals as well as increased political certainty due to the nomination of Joko Widodo (Jokowi) as the main opposition party's (PDI-P) presidential candidate. As such, the 'Jokowi effect' managed to offset negative market sentiments brought on by the (disputed) referendum in Crimea that showed that 97 percent of voters support a split from Ukraine. This intensified political tensions between the West and Russia.
EU foreign ministers and US President Barack Obama are due to discuss further sanctions against Russia. According to the EU and USA, the Moscow-backed referendum was illegal. Pro-Russian forces took control of Crimea, the peninsula of Crimea in southern Ukraine, in February.
Global investors are also in anticipation of the US Federal Reserve's two-day meeting that starts on Tuesday (18/03). Speculation emerged that the Fed will continue to cut its bond-buying program (quantitative easing) by USD $10 billion a month.
Based on the Bloomberg Dollar Index, the rupiah had appreciated 0.58 percent to IDR 11,290 per US dollar at 15:10 local Jakarta time on Monday (17/03), a 19-week high backed by inflows of foreign funds in Indonesia's financial markets. Today, the rupiah was the best-performing Asian currency against the greenback. The US dollar performed mixed against other Asian currencies.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 1.23 percent on Monday (17/03) to IDR 11,272 per US dollar after having absorbed the news about Jokowi's candidacy.
Further Reading:
• Jokowi Candidate for Indonesian Presidency; Markets React Positively
• The Jokowi Effect: Indonesia's Financial Markets Gain on Political Certainty
• Bank Indonesia Keeps Benchmark Interest Rate (BI Rate) at 7.50% in March