At 11am local Jakarta time on Monday (02/06), Statistics Indonesia released important macroeconomic data, including the April 2014 trade balance. While inflation was under control at 0.16 percent (month-to-month) in May 2014 - although slightly higher than expected - the country's April trade balance showed a surprisingly high USD $1.97 billion deficit. After two consecutive months of surpluses as well as forecasts that claimed another slight surplus in April, market participants were concerned about the official trade data, thus giving rise to a depreciating rupiah exchange rate.

Indonesia's Trade Balance 2014 (in billion US Dollar):

2014                              Export                              Import
Month   Oil & Gas   Non Oil & Gas   Total   Oil & Gas
  Non Oil & Gas   Total
January       2,50          11,97   14,47       3,55          11,37   14,92
February       2,73          11,90   14,63       3,46          10,33   13,79
March       2,64          12,55   15,21       4,01          10,53   14,54
April       2,63          11,66   14,29       16,26
Jan-Apr      10,50          48,09   58,59       59,51

Source: Statistics Indonesia

The rupiah will probably experience more pressures in June as inflation usually accelerates ahead of the holy fasting month of Ramadan which starts on 28 June 2014. Although under control, inflation is still high at 7.32 percent (year-on-year) in May 2014. Inflation had accelerated steeply after the government raised prices of subsidized fuels by an average of 33 percent in June 2013, leading to high inflation in the months of June 2013 (1.03 percent), July 2013 (3.29 percent) and August 2013 (1.12 percent).

Political uncertainty - due to the presidential election on 9 July 2014 - also plague the rupiah. The market clearly favours Jakarta Governor Joko "Jokowi" Widodo to become Indonesia's next president. However, the political party coalition that supports Jokowi for president is smaller than the coalition that has put its support behind controversial presidential candidate Prabowo Subianto.

Lastly, pressures on the rupiah may rise as local US dollar demand increases (for dividend payments).

Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 1.11 percent to IDR 11,740 against the US dollar on Monday (02/06).

| Source: Bank Indonesia