It was a rare occasion to see markets go up when Fed Chair Janet Yellen speaks. On Tuesday (29/03) US stocks closed at their highest level so far this year on the news that the Federal Reserve will most likely move slowly in hiking interest rates. The Dow Jones industrial average rose 0.6 percent, the Standard & Poor's 500 index added 0.9 percent, while the Nasdaq composite index rose 1.7 percent. This solid performance was extended in Asian trade on Wednesday (30/03).

Japan was the notable exception in Asia. While other Asian assets gained on the dovish outlook for the US interest rate environment, the Nikkei 225 index fell 1.31 percent. This is due to the strengthening yen that weakens the outlook for Japanese exporters. Another reason why investor sentiment eased in Japan was the release of data that showed the nation's industrial output fell more-than-expected in February.

Overall, capital inflows into emerging market stocks and bonds were strong in March (particularly in Brazil). The Institute of International Finance said the inflows into emerging market bonds and stocks this March were the highest monthly level (at USD $36.8 billion) in almost two years and effectively ended a seven-month period of outflows. Emerging market assets have been in trouble since mid-2013 when the Federal Reserve started to hint at monetary tightening (ending the quantitative easing program). However, two factors explain why emerging market assets have become appealing to investors again since February 2016: rebounding commodity prices (led by crude oil) and speculation that the US central bank will not raise its interest rates too soon.

What are the Key Macro Economic Matters to Watch?

Investors need to find answers to the following questions when investing in emerging market assets:
When will the Federal Reserve raise interest rates again?
What is the outlook for crude oil and other commodities?
What are the economic developments in China?
For how long will interest rates in Europe and Japan remain low?

Asia's emerging market currencies appreciated strongly against the US dollar on Wednesday, led by Malaysia's ringgit which appreciated more than five percent this month (earlier it was Asia's worst-performing currency due to the plunging oil price).

While the Indonesian rupiah appreciated 1.04 percent to IDR 13,256 per US dollar according to the Bloomberg Dollar Index, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) only managed to appreciate 0.02 percent to IDR 13,359 per US dollar on Wednesday (30/03). We expect the JISDOR to strengthen sharply tomorrow.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia