Based on the Bloomberg Dollar Index the value of the Indonesian rupiah weakened 0.41 percent to IDR 13,816 per US dollar on Thursday (08/03), the currency's weakest position since January 2016, ahead of the release of US non-farm payrolls and US employment data due on Friday (09/03). These data are expected to be strong and therefore pave the way for another Fed Funds Rate hike in March 2018.
Meanwhile, there are rising concerns about a looming global trade war as US President Donald Trump seems eager to trigger one. Such a war would impact negatively on US trading partners, including Indonesia. China emphasized that it will respond to any US import tariffs, hence emerging market currencies in Asia were affected negatively today.
Bank Indonesia confirmed that it is intervening in the market to defend the rupiah. However, external pressures are currently too strong.
The rupiah was the weakest emerging currency in Asia today. This should be no surprise considering the rupiah is typically among the first in Asia to be sold when sentiment sours (about 40 percent of the country's bonds are in foreign hands). Global funds moved USD $1.02 billion out of Indonesian bonds last week, the largest five-day outflow since November 2016.
Economist Faisal Basri added that - besides external pressures - the widening current account deficit of Indonesia is also to blame. While Indonesia posted trade surpluses in ten out of 12 months last year, the country has now seen trade deficits in two consecutive months (December 2017 and January 2018), hence putting pressure on the rupiah rate.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.08 percent to IDR 13,774 per US dollar on Thursday (08/03).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia