11 October 2019 (closed)
USD/IDR (14,139) -18.00 -0.13%
EUR/IDR (15,578) +16.98 +0.11%
Jakarta Composite Index (6,105.80) +82.16 +1.36%
After the rally on Thursday (responding positively to the Federal Reserve's announcement to raise its Fed Fund Rate), Indonesian assets are weakening on Friday (18/12) while most other Asian markets are down. Indonesia's benchmark Jakarta Composite Index was down 1.20 percent to 4,501.34 points by 09:45 am local Jakarta time, while the Indonesian rupiah had depreciated 0.22 percent to IDR 14,040 per US dollar (Bloomberg Dollar Index). As such, Indonesian stocks are following the example of US stocks that plunged overnight.
The Dow Jones industrial average fell 1.4 percent, the Standard & Poor's 500 lost 1.5 percent, while the Nasdaq composite index declined 1.4 percent on Thursday (17/12) on persistently falling oil prices and profit taking after the relief rally that took place yesterday as the US Federal Reserve finally made an end to high uncertainty by raising US interest rates, a move that was in line with market expectations.
Although the Federal Reserve said future interest rate hikes will be very gradual and gentle, Indonesia's rupiah is among that emerging market currencies that are expected to weaken the most against the US dollar in 2016. China's economic slowdown is a major problem for Asian economies as China is a key trading partner of these countries. A weaker Chinese yuan (against the US dollar) - due to tighter monetary policy in the USA and fewer trading restrictions on the yuan after the International Monetary Fund added the yuan to its reserve basket - will drag down regional currencies. Countries that are plagued by a wide current account deficit are regarded most vulnerable. This includes Indonesia.
On Thursday, Indonesia's central bank left its interest rate environment unchanged as it wants to monitor developments (markets reactions to the US interest rate hike) first.