On the last trading day of the week, Indonesian stocks plunged 1.63 percent to 4,393.52 points, while the rupiah depreciated 0.22 percent to IDR 13,984 per US dollar (Bloomberg Dollar Index). Most Asian indices were weaker as investors are bracing for - most likely - the first Fed Fund Rate hike in nearly a decade. On 15-16 December the US Federal Reserve will hold a crucial policy meeting. Tighter monetary policy in the USA leads to capital outflows from Indonesia as the country is regarded particularly vulnerable to such a move.
Domestically, Indonesia is plagued by a wide current account deficit (albeit having eased from around 3 percent of gross domestic product in 2014 to an estimated 2 percent of GDP this year), slowing economic growth, and weak commodity prices (curtailing the country's export performance).
Externally, the economic slowdown of China has a direct negative effect on Indonesia as both countries are important trading partners. Furthermore, weak global oil prices are worrisome as it gives a bad signal to prices of other commodities (Indonesia is a major exporter of crude palm oil, coal and nickel). The oil price is heading for the largest weekly decline since March 2015 on speculation that OPEC will keep the market oversupplied.
Jakarta Composite Index (IHSG):
However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.12 percent to IDR 13,937 per US dollar on Friday (11/12).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia