In line with the performance of most emerging stock markets and currencies, Indonesian stocks and the rupiah were under pressure on Monday (28/03). The Jakarta Composite Index fell 1.11 percent, while the Indonesian rupiah depreciated 0.73 percent to IDR 13,343 per US dollar (Bloomberg Dollar Index). This performance is caused by rising speculation that the US Federal Reserve could hike its key Fed Fund Rate as early as April. Several Fed officials have made hawkish comments, while the upward revised 1.4 percent GDP growth of the US economy in Q4-2015 may show that the US is strong enough to cope with another rate hike.
Generally, trading was thin in Asia on the first day of the new week because several markets are still closed for Easter celebrations. Amid such thin trade energy(-related) stocks performed well as crude oil prices are hanging on around the USD $40 per barrel level.
However, expectation of another US interest rate hike in the USA seriously undermines risk appetite and emerging market sentiment (causing capital outflows from these markets), while the US dollar appreciates against most other currencies. The greenback is now heading for its longest rally against the Japanese yen since October 2015. Investors are currently also waiting for the speech of Fed Chair Janet Yellen. On Tuesday (29/03) she will speak on the topic of the US economy and monetary policy.
The Indonesian rupiah was one of the worst-performing emerging market currencies today (against the US dollar) weakening to a four-week low on concern about an April US interest rate hike. Investors will be eagerly awaiting for US employment data that are to be released later this week, in search of clues whether the Federal Reserve could tighten its monetary policy soon. Other interesting data on the radar of investors is China's manufacturing data (due on Friday).
Government bonds of Indonesia also declined, with the ten-year yield climbing three basis points to 7.80 percent.
Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.55 percent to IDR 13,323 per US dollar on Monday (28/03).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia