On the first trading day of the week (Monday 28 April 2014), the Indonesian rupiah exchange rate depreciated 0.19 percent to IDR 11,587 per US dollar based on the Bloomberg Dollar Index. Several factors - both internal and external - influenced the rupiah as well as Indonesian stocks in a negative way. The benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) declined a whopping 1.61 percent to 4,818.76 points, in line with the regional trend in Asia today.
The Indonesian rupiah and stocks felt the impact of market participants' concerns about slowing growth of foreign direct investment (FDI) in Indonesia during the first quarter of 2014. The Indonesia Investment Coordinating Board (BKPM) announced late last week that FDI realization grew 9.8 percent year-on-year (yoy) to IDR 72 trillion (USD $6.2 billion) in Q1-2014, much slower compared to the 25.4 percentage growth pace recorded by Indonesia in the previous quarter. This slowdown is the result of slow global economic recovery as well as political uncertainties due to the legislative and presidential elections in 2014. This causes many investors to 'wait and see' first.
Market participants are also eagerly awaiting several economic data that will be released at the start of May. These data include Indonesia's April inflation rate and the March trade balance. Currently forecasts for both figures are positive with low inflation (or deflation) and a trade surplus.
The market is also waiting for the running mate of Joko 'Jokowi' Widodo. Reportedly, Widodo will announce his partner somewhere this week.
On the external side, market participants are in anticipation of results of the next Federal Reserve meeting (1 May 2014). This meeting will inform the market about further reduction of the stimulus program as well as possible future interest rate hikes. Ahead of such a meeting, the US dollar usually tends to appreciate against emerging currencies.
Lastly, concerns about the crisis in Ukraine have increased. The US and the European Union will impose new sanctions on Russia (companies and individuals close to President Vladimir Putin) amid the detention of international observers by pro-Russian separatists.
However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.28 percent to IDR 11,568 per US dollar on Monday (28/04).| Source: Bank Indonesia