Most of Asian stock markets are declining due to concerns about US-China trade talks after US President Donald Trump said he is unhappy with the current state of negotiations with China. Meanwhile, markets are in doubt whether the unprecedented meeting between Trump and North Korean leader Kim Jong-un will go-ahead as scheduled in Singapore. Jong-un canceled a meeting with South Korea last week because the US and South Korea joined forces in a military training.

Moreover, concern about trade protectionism heightened after Trump ordered a national security review of foreign import vehicles. On Wednesday (23/05) the US Commerce Department said it would launch a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962. This could lead to controversial US tariffs like those imposed on steel and aluminum earlier this year.

What is positive for stock markets, however, is the content of the Federal Reserve minutes that was released on Wednesday (23/05). In the minutes (concerning the monetary policy meeting in early May) the Fed signaled that it is in no hurry to raise the number of interest rate hikes in 2018 despite US inflation having passed beyond the targeted 2 percent (y/y). It is believed that the Fed will continue to raise its rates gradually.

Another positive matter for emerging market assets is that the US 10-year treasury yield fell below the 3 percent level (2.98 percent, down from an earlier peak of 3.12 percent). Although this is still a four-year high, markets are seemingly getting used to the higher benchmark long-term US yield and therefore some investors are coming back to emerging markets.

The Indonesian rupiah appreciated 0.31 percent to IDR 14,165 per US dollar by 13:20 pm local Jakarta time on Thursday (Bloomberg Dollar Index).

Meanwhile, the central bank of Indonesia (Bank Indonesia) inaugurated its new governor, Perry Warjiyo, on Thursday (24/05) for the 2018-2023 period. He replaces Agus Martowardojo whose five-year term ended. Warjiyo said he will continue to safeguard currency stability, meaning that the central bank will continue to intervene in currency and bond markets to stabilize the rupiah. In fact, Warjiyo pledged to take more pre-emptive measures to maintain currency stability.

Due to intervention Indonesia's foreign exchange reserves slid from a record high of USD $131.9 billion in January 2018 to USD $124.9 billion at-end April 2018. Furthermore, Bank Indonesia has bought IDR 50 trillion (approx. USD $3.5 billion) worth of government bonds from foreign sellers so far this year.

Warjiyo added that under his leadership Bank Indonesia will support growth with marcroprudential policies, improve the payment system and deepen the nation's financial markets. He is committed to encourage accelerating economic growth. However, financial system stability (including currency stability) remains is the top priority.