The Federal Reserve cited economic improvement in the USA, the world's largest economy, as reason for the winding down. Household spending and business fixed investment are rising faster than expected although labor market indicators remain mixed.

On Wall Street, the Dow Jones Industrial Average fell 1.19 percent to 15,738.79 on Wednesday (29/01) due to the Federal Reserve's tapering announcement as well as some lackluster earnings reports (for example AT&T and Boeing).

Indonesia's rupiah exchange rate and the country's benchmark stock index (Jakarta Composite Index/IHSG) are expected to weaken on Thursday (30/01) as a result of the winding down of the Fed's quantitative easing program. With continued tapering ahead, emerging markets will feel the further impact of capital outflows. On Thursday morning, Asian index futures fell and emerging-market currency forwards weakened, while the yen and gold maintained gains.

After Ben Bernanke started to speculate about an end to the quantitative easing program in late May 2013, Indonesia's rupiah and IHSG experienced significant corrections:

US Dollar (USD) to Indonesia Rupiah (IDR)

| Source: Bank Indonesia


Jakarta Composite Index