Why Did Indonesian Stocks and Rupiah Weaken Today?
The Indonesian rupiah depreciated sharply, while the country’s stocks fell. According to the Bloomberg Dollar Index, Indonesia’s currency depreciated 0.86 percent to IDR 13,148 per US dollar on Thursday (07/05). This performance was in line with the performance of other Asian currencies. Of the 11 Asian currencies that are followed by Bloomberg, only Japan’s yen appreciated against the US dollar. The Indian rupee was the worst performer today, weakening 1.06 percent against the greenback.
Most currencies and stocks in Asia fell after stock indices on Wall Street were down on weaker-than-estimated US data, while Federal Reserve Chief Janet Yellen warned that stock markets were at risk of overheating.
The US economy only managed to add 169,000 private-sector jobs in April 2015 (the second straight month under the 200,000 mark) as the oil sector downturn continued to plague the labour market. Tomorrow (08/05), the highly-anticipated US Labour Department jobs report is scheduled to be released. Meanwhile, Yellen stated that there are potential dangers in stock markets as market valuations are (generally) "quite high". However, she added that there has been no rapid credit growth and therefore no signs of a financial bubble. These comments put selling pressures on Wall Street and subsequently other stock markets around the globe. Yellen also warned that the current low US Treasury yields may spike when the Federal Reserve further normalizes its monetary policy later this year.
Although weaker-than-expected US data should actually cause a strengthening rupiah as it makes markets convinced that a US interest rate hike will not happen soon, the rupiah depreciated heavily on Thursday (07/05). Head of Research at Korindo Securities Reza Priyambada said that continued concerns about the slowing economy of Indonesia is the primary reason why the currency continues to depreciate. Indonesia’s economic growth in the first quarter of 2015 slowed to 4.71 percent (y/y).
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.19 percent to IDR 13,065 per US dollar on Thursday (07/05).
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank IndonesiaThe benchmark Jakarta Composite Index declined 0.66 percent to 5,150.49 on Thursday (07/05).
Jakarta Composite Index (IHSG):