Despite Government's 'Rescue Package' IHSG and Rupiah Weaken
Today's release of the economic rescue package was not able to put Indonesia's main stock index (IHSG) into green territory. Also, the Indonesian rupiah maintained its losing streak. The IHSG fell 0.04 percent to 4,169.83 points. Interestingly enough, the IHSG was rising previous to the release of the package. After the release, however, it started to weaken slightly, which seems to indicate that market participants were a bit disappointed with the contents of the package as it contained no quick fixes to the economy.
The Indonesian rupiah has now depreciated about 10.9 percent year to date against the US dollar. Most analysts expect the Federal Reserve to limit its quantitative easing program soon because various economic data suggest that the economy of the USA continues its recovery. This will subsequently result in a stronger US dollar. Although most Asian currencies have lost considerably against the US dollar, the rupiah has been hit harder as the country's trade balance has posted a deficit (a shortfall of USD $9.8 billion in Q2-2013), accompanied by higher inflation (8.61 percent year on year).
| Source: Bank Indonesia−
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