Ahead of the new year, the Indonesia rupiah exchange rate continues its downward trend on Monday (30/12). Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) fell to IDR 12,270 per US dollar from IDR 12,260 on the previous trading day. Due to the improving US economy, the US dollar keeps appreciating against the majority of emerging currencies. At most local Indonesian banks, the rupiah is traded significantly above the psychological level of IDR 12,000 per US dollar.
However, based on the Bloomberg Dollar Index (non-delivery forward), the rupiah appreciated 0.27 percent to IDR 12,228 per US dollar at 14:01:01 local Jakarta time after having depreciated to IDR 12,276 in the morning. The main reason for the continued decline of the rupiah is the lack of positive market sentiments on the local market which can reverse the situation.
Bank Indonesia stated that pressures on the rupiah currency will ease in 2014 because external and internal macroeconomic conditions will improve. Indonesia's high inflation (8.37 percent year-on-year in November 2013) and the current account deficit (3.8 percent of GDP in the third quarter of 2013) have already shown an improving trend and are expected to reach sustainable levels next year. The banks also stated that increased certainty about the Federal Reserve's quantitative easing program will also have a positive impact on the rupiah exchange rate. Last week, the Federal Reserve announced that it will reduce its bond-buying program by USD $10 billion to USD $75 billion per month from January 2014. However, in December 2013 the 'tapering' decision caused capital outflows amounting to USD $3.6 billion from emerging countries like South Korea, Thailand, Philippines and Indonesia.