After appreciating on Monday morning (09/12), the Indonesia rupiah exchange rate started to weaken against the US dollar in the afternoon. At 15:10:29 local Jakarta time, the rupiah stood at IDR 11,970 per US dollar in the Bloomberg Dollar Index, a 0.05 percent depreciation from the start of the day. The rupiah exchange rate is fluctuating due to positive sentiments caused by Indonesia's October trade surplus as well as China's low inflation and negative sentiments brought on by the looming end of the Federal Reserve's quantitative easing program.
On Monday (09/12), Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) appreciated 0.03 percent to IDR 11,956 per US dollar.
Last week, the IDR rupiah exchange rate appreciated slightly against the US dollar. Bank Indonesia's mid rate strengthened 0.14 percent from IDR 11,977 to 11,960 per US dollar, supported by promising economic data from China (which suggest that Indonesian exports to China may increase) as well as a minor intervention by Bank Indonesia. On Friday (06/12) it was reported that Bank Indonesia intervened in the foreign exchange market by selling (a relatively small portion of) US dollars. The bank also urged Indonesian exporters to place their US dollars at local banks.
Pressure on the rupiah is traditionally higher at the year-end as local companies purchase US dollars to settle US dollar-denominated debts. In line with other emerging currencies, the rupiah is also feeling the impact of market participants' concern about a sooner-than-expected winding down of the Federal Reserve's quantitative easing program. Lastly, Indonesia's ongoing current account deficit (USD $8.4 billion in the third quarter of 2013) causes continuous pressure on the value of the rupiah.
Market participants are currently waiting for Bank Indonesia's Board of Governor's meeting (12/12) and the Federal Reserve's FOMC meeting (17-18/12) before engaging in too much trading. Speculation has arisen that Bank Indonesia will raise its benchmark interest rate (BI rate) one more time at the meeting. Currently, the BI rate stands at 7.50 percent. At the start of the year, it was 5.75 percent.
Bank Indonesia (BI) has stated that the institution is optimistic about the prospects of the performance of the rupiah in 2014 as inflation and imports are easing. Other factors that are expected to contribute to a stronger rupiah rate next year are certainty about the QE3 program as well as the legislative and presidential elections in Indonesia. Prior and after elections, the rupiah normally shows an appreciating trend. Difi A. Johansyah, Executive Director of Bank Indonesia's Communication Department, expects that the value of the currency - currently balancing around IDR 12,000 - will strengthen to IDR 11,000 per US dollar by the first or second quarter in 2014.
Indonesia Stock Exchange
After last week's poor performance, Indonesia's benchmark stock index (IHSG) rose 0.34 percent to 4,195.06 in the first trading session on Monday (09/12). The index is expected to stay in the green zone during the second session.