As expected, emerging markets in Asia, including Indonesia, were negatively affected by the speech of Federal Reserve Chair Janet Yellen in Jackson Hole last week. Her speech - touching the topics of solid new jobs creation - provided ammunition for analysts and investors to raise speculation about a near-term US Fed Funds Rate hike. Indonesia's benchmark Jakarta Composite Index fell 1.25 percent to 5,370.76 points, while the Indonesian rupiah depreciated 0.42 percent to IDR 13,267 per US dollar (Bloomberg Dollar Index).
Meanwhile, Federal Reserve Vice Chairman Stanley Fischer stated last week that a US interest rate hike could occur as early as September 2016. The next policy meeting of the US central bank is scheduled for 20-21 September 2016. Investors will now be eagerly awaiting for US jobs data due on Friday (US non-farm payrolls) in search of new clues whether a September rate hike is realistic as any move of the Fed will be data dependent. Positive US jobs data coming Friday may cause another round of sell-offs in emerging market assets.
Most stock markets in Asia fell today, with the notable exception being Japan's Nikkei Index. Rising Japanese stocks were caused by the weaker yen (versus the US dollar) and the Bank of Japan's statement that it will add stimulus, if required, to boost the local economy.
Meanwhile, crude oil prices fell on Monday (29/08) after Iraq's oil production grew, while Iran announced that it will only participate in any oil freeze talks if fellow oil exporters recognize the nation's right to regain market share (fully).
Similar to stocks, emerging market currencies depreciated as looming monetary tightening in the US gives rise to a strengthening US dollar. Today, the Indonesian rupiah touched its lowest level in two months. However, although there are depreciating pressures in the foreseeable future, the rupiah can still count on some support due to the relatively high bond yields.
Bank Indonesia's benchmark rupiah rate (the Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.25 percent to IDR 13,275 per US dollar on Monday (29/08).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia