Earlier this week it was reported that gross domestic product (GDP) growth in the world’s largest economy was recorded at 4.0 percent (year-on-year) in the second quarter of 2014. Meanwhile, US jobless claims fell to an eight-year low and a jobs report forecast signals a sixth consecutive month of 200,000-plus gains. However, there is also concern about weak US company earnings (for example Whole Foods Market and Exxon Mobil) as well as the looming end of the US Federal Reserve’s stimulus program (which includes the bond-buying program or quantitative easing and the low interest rate climate). Another concern is that US stock valuations are currently high compared to the historical norms. Combined, weak corporate reports, monetary tightening and relatively expensive stocks resulted in declining indices on Wall Street on Thursday (31/07): the Dow Jones Industrial Average fell 1.9 percent, the Standard & Poor’s 500 fell 2 percent, and the Nasdaq declined 2.1 percent.

Apart from developments in the USA, increased US dollar demand is also caused by global developments that lead to investors’ search for safe havens. The USA and Eurozone increased pressures on Russia after the Malaysia Airlines disaster, while Argentina was declared (by Standard & Poor’s) in default on a debt payment. However, Argentinian President Cristina Fernandez de Kirchner denied that the country has defaulted on its debt.

Despite today’s sharp rupiah depreciation, the currency was the best performing Asian currency in the month of July. Based on Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR), the currency appreciated 3.16 percent against the US dollar in July 2014. This strong performance was caused by the outcome of Indonesia’s presidential election: market favourite Joko Widodo won this election.

| Source: Bank Indonesia

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