Despite Unchanged BI Rate, Indonesia's Stock Index and Rupiah Down
Although Indonesia's benchmark interest rate (BI rate) was kept at the level of 7.5 percent (in line with market expectation) today (12/12), it was not able to support the country's stock index. Indonesia's IHSG index fell 1.39 percent to 4,212.22 points. The index was negatively impacted by Asian stock indices that were down due to concerns about the looming end of the Federal Reserve's quantitative easing program. This made investors' positive reaction to the BI rate of temporary nature. Weak openings in Europe increased downward pressure.
| Source: Bank Indonesia
Despite no change to the BI rate, the Indonesian rupiah exchange rate continued its downward trend. Market participants have more confidence in currencies that show a stronger and clearer performance. Ahead of a possible winding down of quantitative easing, the US dollar is still investors' darling. The Euro also appreciated as industrial production of the Eurozone showed an improvement. The Pound Sterling also gained after the Bank of England stated that the economy of Great Britain will expand 1.4 percent in 2013, instead of its previous assumption of 0.6 percent.
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