Indonesian stocks and the rupiah improved on the last trading day of the week supported by moderately rising indices on Wall Street on Thursday (07/05), which was in stark contrast to heavy selling that occurred one day earlier after Federal Reserve Chair Janet Yellen’s statement that US stock prices may be overvalued. Meanwhile, weak trade data from China could a reason for policymakers to provide more stimulus. Indonesia’s benchmark stock index climbed 0.62 percent to 5,182.21 points on Friday (08/05).
At the start of the day most regional currencies in Asia depreciated against the US dollar as solid US weekly jobless claims raised expectation of positive April US employment data. This would then increase expectations for higher US interest rates, fuelling US dollar demand at the expense of emerging market currencies, including the rupiah.
However, markets were not overly affected by US economic data as weak trade data from China, the world’s second-largest economy, fuels expectation of more stimulus. Earlier today it was announced that China’s exports fell 6.4 percent (y/y) in April 2015, while imports plunged 16.2 percent (y/y), another clear sign that China is dealing with an economic slowdown. These weak data increase speculation that Chinese authorities will deliver more stimulus measures to boost the local economy.
Jakarta Composite Index (IHSG):
US Treasury prices increased sharply overnight, resulting in lower benchmark yields. The yield on the ten-year Treasury note declined to 2.19 percent from 2.25 percent on Wednesday (07/05), an unusually large shift. Meanwhile, US jobless claims rose to 265,000 in the period 26 April - 2 May 2015 hovering near a 15-year low signalling that the US labor market continues to strengthen despite the country’s moderate economic growth. Markets are now waiting for the release of April US nonfarm payrolls and the April US unemployment rate, which are scheduled to be released later today (08/05).
From the Eurozone there was the positive news that Greece managed to make a USD $222 million repayment to the International Monetary Fund (IMF) on Wednesday (06/05). However, the country has a much larger repayment due next week (about 750 million euros) to the IMF.
Based on the Bloomberg Dollar Index, Indonesia’s currency appreciated 0.21 percent to IDR 13,121 per US dollar on Friday (08/05). However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.86 percent to IDR 13,177 per US dollar on Friday (08/05) as it still needed to absorb the negative market sentiments that emerged on the previous trading day.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia