The government's disappointing US dollar-denominated bond auction on Monday (25/11), which only raised USD $190 million (thereby significantly falling short of its USD $450 million target), demonstrates the current "imbalance in dollar demand and supply". The bond issuance was negatively impacted by investors' concern about the looming winding down of the Federal Reserve's quantitative easing program as recent US economic data have shown a gradual improvement.

| Source: Bank Indonesia

Indonesian economist A. Tony Prasetiantono stated that the rupiah will break through the psychologically sensitive IDR 12,000 per US dollar mark if the Indonesian government's maturing foreign debt will total USD $21 billion. At the end of November, US dollar demand in Indonesia has increased significantly due to the repatriation of profits and payment of maturing debts.

Indonesia's central bank (Bank Indonesia) has repeatedly stated that the rupiah's depreciation - triggered by external factors - is in the line with the currency's current fundamentals. The most influential external factor is uncertainty about the future of the Fed's USD $85 billion per month bond-buying program (quantitative easing). Bank Indonesia expects that US tapering will start in the first quarter of 2014.

Indonesia Stock Exchange

The benchmark stock index of Indonesia (Jakarta Composite Index or IHSG) fell 0.02 percent during the first trading session on Thursday (28/11).