Indonesian stocks and the rupiah are under pressure on Thursday (24/11). Amid rising expectation of a Fed Funds Rate hike before the year-end, the US dollar rose to a 13 year-high implying all emerging market currencies are sliding. The Indonesian rupiah, one of the more vulnerable emerging market currencies, had depreciated 0.39 percent to IDR 13,542 per US dollar by 10:20 am local Jakarta time. Meanwhile, the benchmark Jakarta Composite Index had fallen 0.85 percent to 5,167.87 points by the same time.
Indonesian Rupiah vs US Dollar (JISDOR):| Source: Bank Indonesia
US stocks were mixed overnight. While the Dow Jones industrial average and Standard & Poor's 500 indexes set new records, the Nasdaq declined slightly on Wednesday (23/11). Meanwhile, the US dollar continued to strengthen as US bond (treasury) yields hovered near multi-year highs. Yesterday, the two-year yield touched its highest level since April 2010 as investors expect president-elect Donald Trump to increase debt-funded spending and boost higher economic growth and inflation. This should trigger a reaction from the Federal Reserve.
Most investors and analysts now expect to see the Federal Reserve raise interest rates at the December 2016 policy meeting. These expectations are fuelled by upbeat US economic data: new orders of US manufactured capital goods rebounded in October, while consumer sentiment jumped in November. Furthermore, based on the minutes of the Federal Reserve's November policy meeting, most officials think it is appropriate to raise US interest rates relatively soon. On Thursday (24/11) Wall Street is closed for Thanksgiving.
While most stock markets in Asia are falling, the weak yen makes Japan's export-oriented shares more attractive and therefore Japan's Nikkei Index manages to buck the trend today. The Nikkei is up almost one percent, touching a near 11-month high.
Meanwhile, China's yuan is touching an 8-year low against the US dollar.