Stock markets in Asia were mixed on Friday (25/09) after Federal Reserve Chairwoman Janet Yellen said in a speech at the University of Massachusetts that the US central bank is still on track to raise interest rates before the year-end (provided no economic shocks take place as the move is data-dependent). After this looming hike, Yellen suggests to gradually tighten US monetary policy thereafter.
Volatility remains a persistent problem amid uncertainty about the timing of higher US interest rates. Last week, the US central bank decided to postpone hiking its Fed Fund Rate at its two-day policy meeting. Many investors interpreted this decision as an indication that the Fed believes the global economy is not strong enough yet to absorb such a shock. However, when Yellen yesterday said that the hike is still likely to occur in 2015, part of the investor community regarded this a positive message as the Fed may have enough confidence in global economic conditions to implement the rate increase. Yellen stated that US policymakers continue to monitor foreign developments but does not think that these developments are to derail the US economy. As a result, European stocks opened sharply higher on Friday.
China’s benchmark Shanghai Composite Index, still plagued by high volatility fell 1.60 percent while Japan’s Nikkei 225 rose 1.76 percent on Prime Minister Shinzo Abe’s pledge to strengthen the Japanese economy after the country’s August consumer prices declined for the first time in more than two years.
Most Asian currencies depreciated against the strong US dollar on Friday. Both Malaysia’s ringgit and Indonesia’s rupiah hit a fresh 17-year low against the greenback. Based on the Bloomberg Dollar Index, the rupiah depreciated 0.06 percent to IDR 14,693 per US dollar on Friday (25/09). Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.46 percent to IDR 14,690 per US dollar.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
It was also reported today that Bank Indonesia is set to announce new policies to support the ailing rupiah. These policies, expected to be published next month, are aimed at raising onshore US dollar supplies.
Juda Agung, Executive Director of Monetary and Economic Policy at Indonesia’s central bank, said that Indonesia’s economic growth will rebound in the third quarter of 2015. He sees GDP growth at 4.9 percent (y/y) in the third quarter, followed by a growth pace of at least five percent (y/y) in the last quarter of 2015. In the second quarter of 2015, Indonesia’s GDP growth eased to a six-year low of 4.67 percent (y/y). Meanwhile, Indonesia’s September inflation is expected around 0.06 percent (month-on-month).
Indonesia’s benchmark Jakarta Composite Index fell 0.82 percent to 4,209.44 points on Friday (25/09).
Jakarta Composite Index (IHSG):