Apart from external factors (China’s weak manufacturing activity and persistent uncertainty about the timing of higher US interest rates) that plague Indonesian assets today, there are also domestic factors that push Indonesian stocks and the rupiah into the red. These domestic factors include Indonesia’s downgraded economic growth forecasts and the central bank’s downgraded rupiah outlook. Meanwhile, Indonesia’s foreign exchange reserves - used to defend the rupiah - have declined further.

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The government of Indonesia will tender three geothermal energy projects in October 2015. These three projects are the Way Ratai (South Sumatra), Bukit Kili (West Sumatra), and Marana (Central Sulawesi) fields. Indonesia is estimated to contain about 40 percent of the world’s geothermal reserves and therefore entails great potential for this energy source. However, Southeast Asia’s largest economy only utilizes approximately 4.7 percent (1,403 megawatts) of its total geothermal capacity (29,475 megawatts).

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In line with other Asian markets, Indonesian stocks and the rupiah are weakening heavily on Wednesday (23/09). Based on the Bloomberg Dollar Index, Indonesia’s rupiah had depreciated 0.71 percent to IDR 14,655 per US dollar by 11:08 am local Jakarta time, while the benchmark Jakarta Composite Index had fallen 1.56 percent to 4,276.43 points by the same time, with the financial sector in particular taking a hit. There are several causes that explain this weak performance today.

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Today (22/09), the Indonesian rupiah extended its weak performance and has passed beyond the level of IDR 14,500 per US dollar. Most Asian currencies continue to fall against the greenback as uncertainty about the timing of higher US interest rates persists. Although the Federal Reserve decided to postpone a Fed Fund Rate hike at its September policy meeting, markets are still preparing for a hike before the year-end as many Federal Reserve objectives had been met.

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