The week ended well for both the Indonesian rupiah exchange rate and the benchmark Jakarta Composite Index (IHSG). Based on the Bloomberg Dollar Index, the rupiah appreciated 0.30 percent to IDR 11,413 per US dollar at the end of Friday's trading day (16/05). Meanwhile, the IHSG surged 0.80 percent to finish just above the psychological level of 5,000 points. The good performance was supported by investors' positive response towards the latest political developments in Indonesia.
Earlier this week, it was officially announced that the PDI-P (winner of the 2014 legislative election) forms a coalition with the NasDem and PKB parties. Moreover, the coalition declared to name highly popular Governor of Jakarta Joko Widodo as its presidential candidate in the presidential election (which will be held on 9 July 2014). There is a serious chance that the Golkar party (the second-largest party in the legislative election) will join the coalition. If the Golkar teams up then the coalition has more than half of the parliamentary seats under its control. This will make policy making a lot easier for the future.
The rupiah - similar to other emerging market currencies - has also won ground against the US dollar as some US economic data were disappointing. For example, US retail sales only increased 0.1 percent in April 2014.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.63 percent to IDR 11,415 against the US dollar on Friday (16/05).
Meanwhile, the Jakarta Composite Index rose 0.80 percent to 5,031.57 on Friday, the highest level since early May last year.