Although many currencies weakened against the US dollar after the US Federal Reserve stated that it is on track to raise its key Fed Fund Rate "somewhere next year" amid structural improvement of the US economy (after having kept the rate near zero for a "considerable time"), Indonesia's rupiah opened strong on Thursday (18/12). Based on the Bloomberg Dollar Index, Indonesia’s currency had appreciated 0.91 percent to IDR 12,553 per US dollar at 9:15 local Jakarta time.
Fed Chair Janet Yellen commented that higher US interest rates are highly unlikely to occur “for at least the next couple of Fed meetings”. Analysts speculate that this could mean that the Fed will tighten its monetary policy at the start of the second quarter of 2015.
Indonesia’s central bank (Bank Indonesia) has been intervening in the foreign exchange markets this week in a successful attempt to support the currency. Woori Korindo Securities Indonesia said that the central bank used IDR 200 billion (roughly USD $16 million) to purchase government bonds. Bank Indonesia targets to keep the rupiah exchange rate between IDR 11,900 and IDR 12,300 per US dollar. Earlier this week, the rupiah had almost touched IDR 13,000 per US dollar, a 16-year low.
Overseas investors sold a net IDR 13.03 trillion (USD $1.03 billion) of rupiah-denominated sovereign bonds and USD $337 million of stocks in December so far ahead of higher US interest rates in 2015.