Both the Indonesian rupiah exchange rate and the country's benchmark stock index (known as the Jakarta Composite Index or IHSG) have strengthened significantly on Wednesday's trading day (14/05). The rupiah appreciated 0.76 percent to IDR 11,450 per US dollar by 15:00 local Jakarta time according to the Bloomberg Dollar Index. Meanwhile, the IHSG gained 1.09 percent to 4,975.13 by the same time. Main reason for this strong performance is the official declaration of the PDI-P to form a coalition with NasDem and PKB.
More importantly, the coalition supports Joko "Jokowi" Widodo as its presidential candidate for the July 2014 presidential election. Although it had been known for a while that the PDI-P supports Jokowi, the coalition's official declaration was only announced today. The PDI-P, winner of the legislative election (held on 9 April 2014) needed to form a coalition with other political parties to nominate Jokowi as its presidential candidate as the party was unable to secure 25 percent of the votes in the April election.
The declaration, which is still ongoing at the time of writing, provides more political certainty and therefore the market reacts positively although the running mate of Jokowi is still unknown. Jokowi's running mate may be announced today as well. Jusuf Kalla is a strong candidate for that position.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.33 percent to IDR 11,487 against the US dollar on Wednesday (14/05).