The benchmark stock index of Indonesia - Jakarta Composite Index (IHSG) - fell sharply on Monday (27/04) amid mixed regional stock markets. Three main factors caused the weak performance of Indonesian stocks. Firstly, several key companies posted weak first quarter corporate earnings. Secondly, Indonesia’s economic growth in the first quarter may fall below 5 percent (y/y), which would be a six-year low. Lastly, Indonesia is getting bad press around the globe due to imminent executions of convicted foreign drug traffickers.

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On 26 April 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as updates on Indonesia’s telecommunications, cement and rubber industries, the performance of the rupiah, the 24th World Economic Forum on East Asia, mutual fund management, and more.

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Over the past week the Indonesian rupiah depreciated 0.60 percent to IDR 12,941 per US dollar (Jakarta Interbank Spot Dollar Rate). At the start of the week the rupiah experienced severe pressure as market participants were concerned about Indonesia’s slowing economic growth. However, in the second half of the week, Indonesia’s currency somewhat improved as the US dollar was negatively affected by weak US economic data. Based on the Bloomberg Dollar Index, the rupiah finished at IDR 12,922 per US dollar on Friday (24/04).

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In line with other Asian emerging market currencies, the Indonesian rupiah is depreciating against the US dollar on Monday’s trading day (20/04). According to the Bloomberg Dollar Index, Indonesia’s currency had depreciated 0.25 percent to IDR 12,882 per US dollar at 13:00 pm local Jakarta time. However, Head of Research at NH Korindo Securities Reza Priyambada believes that the currency cannot depreciate much further as positive economic data provides enough support for the rupiah.

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On 19 April 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as an update on Bank Indonesia’s interest rate policy, the performance of the rupiah, the March trade balance, updates on coal, palm oil, cement and car sales, GDP growth forecast, alcohol in Indonesia, and more.

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Over the past two days the Indonesian rupiah has performed strongly against the US dollar. The primary reason for this performance is Indonesia’s March trade surplus. On Wednesday (15/04), Statistics Indonesia announced that the country’s March trade surplus totaled USD $1.13 billion. This is Indonesia’s fourth straight monthly trade surplus and the highest one since December 2013. Moreover, the USD $1.13 billion March surplus was nearly twice the size that analysts had forecast previously.

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Both Indonesian stocks and the rupiah are weakening on Monday’s trading day (13/04). During the first trading session at the Indonesia Stock Exchange (IDX), the benchmark Jakarta Composite Index declined 0.65 percent to 5,455.45 points. Meanwhile, the rupiah had depreciated 0.35 percent to IDR 12,973 per US dollar based on the Bloomberg Dollar Index at 1:05 pm local Jakarta time on Monday (13/04). What are the primary factors that influenced these weak performances?

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The central bank of Indonesia (Bank Indonesia) announced that the country’s foreign exchange reserves fell by USD $3.9 billion to USD $111.6 billion at the end of March 2015 as the central bank used part of the forex reserves to support the Indonesian rupiah which had started to depreciate markedly due to bullish US dollar momentum amid further looming monetary tightening in the USA. The rupiah had fallen to a 17-year low of IDR 13,237 per US dollar in mid-March as market players are anticipating an interest rate hike in the USA.

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Minutes of the Federal Reserve’s latest FOMC meeting (17-18 March), released Wednesday (08/04), show that the US central bank is divided about the timing of higher US interest rates. Several policymakers would approve such an interest rate hike in June 2015, while others would prefer to see rates increase later this year or even next year as they consider that the US economy is still not strong enough yet. However, when reading the minutes there are some signs suggesting that the institution is on course to raise its key rate this year.

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Indonesian stocks and the rupiah are performing well on Monday’s trading day (06/04) after weak US economic data suggests that the US central bank (Federal Reserve) will still refrain from raising its key interest rate too soon. Weaker-than-expected US jobs data caused that most Southeast Asian stock markets strengthened today. Moreover, the rupiah also felt the positive impact. According to the Bloomberg Dollar Index, the rupiah had appreciated 0.54 percent to IDR 12,950 per US dollar by 15:17 pm local Jakarta time.

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While most emerging Asian currencies fell, the Indonesian rupiah exchange rate appreciated 0.08 percent to IDR 11,523 per US dollar based on the Bloomberg Dollar Index on Monday (12/05). The depreciating Chinese yuan, after its central bank set the midrate at its lowest level in eight months, put pressure on other Asian currencies. Today, Indonesia's Finance Ministry sold IDR 10 trillion rupiah (USD $867 million) of bonds, higher than the indicative target of IDR 8 trillion rupiah. Meanwhile, Indonesia’s two-year bonds gained.

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The central bank of Indonesia (Bank Indonesia) decided at today’s Bank Indonesia Board of Governors’ Meeting, convened on 8 May 2014, to maintain the country's benchmark interest rate (BI rate) at 7.50 percent, with the Lending Facility rate and Deposit Facility rate held at 7.50 percent and 5.75 percent respectively. This policy is consistent with efforts to steer the rate of inflation towards its target corridor of 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce the current account deficit to a more sustainable level.

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Completely opposite to our expectations, the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) managed to climb 0.57 percent to 4,862.02 points on Wednesday (07/05). The gain was unexpected as there were no clear factors that could provide positive market sentiments. Moreover, today's Asian stock indices were mostly down. Coincidence or not, tomorrow Bank Indonesia will announce whether its benchmark interest rate (BI rate) - currently set at 7.50 percent - will be changed or maintained.

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Indonesian Finance Minister Chatib Basri said that the country's economic growth in 2015 is targeted in the range of 5.5 to 6.3 percent. Amid further Federal Reserve tapering and possible interest rate hikes in the world's largest economy, chances of capital outflows from emerging markets (including Indonesia) are becoming larger. Basri said that these global conditions impact on GDP growth, the Indonesian rupiah exchange rate and inflation. Therefore, 2015 is a transition year, reflected by tighter economic projections and state spending.

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At the end of Friday’s trading day (02/05), the Indonesian rupiah exchange rate appreciated 0.32 percent to IDR 11,525 per US dollar based on the Bloomberg Dollar Index. The rupiah performed better than most of its regional emerging peers as inflation and trade data, which were released today by Statistics Indonesia, provided positive market sentiments. Indonesian inflation eased to 7.25 percent (year-on-year) in April 2014, from 7.32 percent a month earlier. Meanwhile, the country posted a trade surplus of USD $673 million in March 2014.

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Indonesia’s HSBC Markit Purchasing Manager’s Index (PMI) showed a reading of 51.1 in April 2014, significantly up from 50.1 in the previous month, meaning that manufacturing activity in Indonesia has grown (a reading above 50.0 indicates expansion, while a reading below 50.0 indicates contraction). In fact, amid improved economic conditions as well as strong demand, manufacturing activity in Southeast Asia’s largest economy expanded at the fastest pace in 11 months.

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On the first trading day of the week (Monday 28 April 2014), the Indonesian rupiah exchange rate depreciated 0.19 percent to IDR 11,587 per US dollar based on the Bloomberg Dollar Index. Several factors - both internal and external - influenced the rupiah as well as Indonesian stocks in a negative way. The benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) declined a whopping 1.61 percent to 4,818.76 points, in line with the regional trend in Asia today.

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The Indonesian rupiah exchange rate ended the week with a 0.32 percent gain to IDR 11,565 per US dollar on Friday (25/04) based on the Bloomberg Dollar Index. Despite still high local demand for US dollars ahead of the month-end (for reasons of profit repatriation, imports and debt repayments), the rupiah managed to appreciate as (foreign and domestic) investments in Indonesia were reported to have reached a new record at IDR 106.6 trillion (USD $9.4 billion) in the first quarter of 2014.

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Due to a lack of positive domestic and external sentiments, the Indonesian rupiah exchange rate has depreciated to a six-week low against the US dollar. Based on the Bloomberg Dollar Index, Indonesia's currency declined 0.66 percent to IDR 11,521 per US dollar by 16:22 local Jakarta time. In fact, several negative domestic sentiments are the reason behind the current depreciation. Firstly, revived concerns about Indonesia's current account deficit and, secondly, concerns about capital outflows due to dividend payments.

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The Indonesian rupiah exchange rate moved within limited range on Wednesday. Based on the Bloomberg Dollar Index, the currency depreciated 0.07 percent to IDR 11,436 per US dollar. Since Thursday (10/04), the rupiah has had to cope with pressures as Indonesia's legislative election was unable to provide political certainty. On the other hand, the country's improved economic fundamentals - easing inflation and the narrowing current account deficit - have resulted in capital inflows, thus supporting the rupiah.

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