The Indonesian rupiah is having one of its strongest days in recent history. By 13:00 pm local Jakarta time, the rupiah had appreciated 3.90 percent to IDR 13,346 per US dollar (Bloomberg Dollar Index). After the release of the Federal Reserve's FOMC minutes on Thursday (08/10), emerging markets assets have strengthened robustly on speculation that the Fed will not raise US interest rates anytime soon. Rebounding commodity prices also support the performance of the rupiah. Indonesia's currency is set to post its best weekly gain in more than a decade.

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After the release of the minutes of the Federal Reserve's 16-17 September policy meeting (FOMC), Indonesian assets (rupiah and stocks) strengthened significantly on Friday (09/10). The minutes, released on Thursday (08/10), show that the US central bank prefers to postpone a US interest rate hike for now in order to wait for additional information that informs whether the US economic growth outlook will not deteriorate due to global conditions. Moreover, US inflation remains stuck at low levels (far below the Fed's 2 percent target) due to lower oil prices and the strong US dollar.

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On Thursday (08/10) most emerging market currencies and stocks in Asia weakened as investors engaged in profit-taking (after having witnessed a remarkable rally over the past couple of days), while waiting for the release of the Federal Reserve's policy meeting minutes (due later today). The Indonesian rupiah had weakened 0.33 percent to IDR 13,867 per US dollar based on the Bloomberg Dollar Index while the benchmark Jakarta Composite Index was down 0.04 percent 4,487.09 by 15:00 pm local Jakarta time.

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Indonesia's rupiah and Malaysia's ringgit led gains among emerging market currencies in Asia on Wednesday (07/10) on the back of capital inflows (triggered by an expected delay in higher US interest rates), better-than-expected Malaysian export data and higher oil prices. The Indonesian rupiah appreciated 2.95 percent to IDR 13,821 per US dollar (Bloomberg Dollar Index), the strongest gain in seven years. Meanwhile, yields on ten- and 15-year Indonesian government bonds fell to 8.710 percent and 8.870 percent, respectively.

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Investors' confidence in Indonesia's rupiah restored over the past three days after markets began to believe that the US Federal Reserve has little scope to raise its key Fed Fund Rate this year (due to weak US non-farm payrolls and US ISM non-manufacturing PMI). Bank Indonesia's role should also be highlighted. Indonesia's central bank intervened heavily (through currency swaps and by using its foreign exchange reserves) to stabilize and keep the currency from weakening toward and beyond the IDR 15,000 per US dollar level. This tells investors that Bank Indonesia will not allow a worse decline.

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Indonesia again led gains in Asia amid global relief due to the possible delay in an US interest rate hike. Indonesia's benchmark Jakarta Composite Index rose 2.35 percent to 4,445.78 points, while the Indonesian rupiah appreciated 1.81 percent to IDR 14,241 per US dollar according to the Bloomberg Dollar Index on Tuesday (06/10). After seeing the release of weak US non-farm payrolls on Friday (02/10) - triggering the assumption that US labor conditions are not strong enough to absorb an interest rate increase - global equity markets and emerging market currencies rebounded.

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Indonesian stocks and the rupiah continued to strengthen sharply on Tuesday morning on global relief after weak US jobs growth data were released last Friday (02/10) dimming chances of a Federal Reserve interest rate hike before the end of the year. Yesterday, Asian markets, Wall Street and Europe all surged. Moreover, with US interest rates remaining at between 0.00 and 0.25 percent in the foreseeable future, investors are attracted by higher-yielding emerging market assets such as Indonesian stocks and the rupiah.

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Indonesian stocks and the rupiah experienced a remarkable rebound on Monday (05/10) as global markets were relieved to see weak US jobs growth data at the end of last week. On Friday (02/10), it was announced that US September non-farm payrolls stood at 142,000, far below the market consensus of 203,000. Most investors now believe that the US Federal Reserve has too little scope to raise its key interest rate before the end of the year or even before the second quarter of 2016.

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Asian stock indices surged on Monday morning (05/10) on relief that the Federal Reserve may need to postpone a key Fed Fund Rate hike after the release of weak US jobs data at the end of last week. Indonesia's benchmark Jakarta Composite Index was up 2.40 percent to 4,309.71 points by 10:30 am local Jakarta time. Meanwhile, the rupiah had appreciated 0.59 percent to IDR 14,559 per US dollar by the same time (Bloomberg Dollar Index).

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For the 12th consecutive month Indonesia's manufacturing activity contracted as output and new orders declined. The Nikkei/Markit purchasing managers' index (PMI) fell to 47.4 in September 2015 from 48.4 in the preceding month and below analysts' forecasts (a reading of 50.0 separates contraction from expansion). September's contraction was the second-fastest drop in Indonesia's manufacturing activity since the index was started in early 2012.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the March 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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The Indonesian rupiah exchange rate extends its depreciation on Friday (11/04) after market participants showed their concern about Indonesia's legislative election result on Wednesday (09/04). As the election did not result in a clear victory for the PDI-P (the main opposition party which intends to nominate popular Jakarta Governor Joko 'Jokowi' Widodo as presidential candidate), the fragmented outcome is expected to lead to continued political uncertainty ahead of Indonesia's presidential election on 9 July 2014.

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Most emerging market currencies, including the Indonesian rupiah exchange rate, appreciated against the US dollar on Tuesday (08/04) due to carry trade (meaning the selling of low-yield currencies for higher-yielding assets) and expected stimulus from China's government to boost its economy (Chinese shares in fact gained 2.2 percent on this stimulus speculation). The rupiah appreciated 0.14 percent to IDR 11,289 per US dollar based on the Bloomberg Dollar Index, partly due to variety of domestic factors.

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Indonesia's gross domestic product (GDP) growth is expected to move sideways in the first quarter of 2014. Finance Minister Chatib Basri forecasts a growth rate of between 5.7 and 5.8 percent, similar to the growth pace that was recorded in the fourth quarter of 2013 (5.78 percent). Based on data from Statistics Indonesia (BPS), economic growth in Indonesia has slowed since the second quarter of 2013. In Q2-2013, Indonesia's GDP expanded by 5.89 percent, thereby ending a ten-quarter streak of +6 percentage growth.

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The rate of inflation in March 2014 demonstrated that the ongoing downward trend persists. In the reporting month of March 2014, inflation was recorded at 0.08 percent (month-to-month) or 7.32 percent (year-on-year), down from the rates recorded in the previous two months at 1.07 percent (mtm) or 8.22 percent (yoy) in January and 0.26 percent (mtm) or 7.75 percent (yoy) in February. The declining inflation trend is further evidenced by a lower rate recorded in March 2014 than the historical average over the past six years at 0.24 percent (mtm).

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At 15:00 local Jakarta time on Tuesday (01/04), the Indonesian rupiah exchange rate as well as the country's benchmark stock index (known as the IHSG or Jakarta Composite Index) have shown a positive performance so far. Based on the Bloomberg Dollar Index, the rupiah appreciated 0.64 percent to IDR 11,288 per US dollar, while the IHSG climbed 2.15 percent to 4,871.38. A number of internal and external factors contributed to this remarkable performance today.

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The Indonesian rupiah exchange rate depreciated 0.31 percent to IDR 11,447 per US dollar on Thursday (27/03) based on the Bloomberg Dollar Index. The currency's strong performance in February and the first half of March, supported by Indonesia's easing current account deficit and inflation, has met resistance due to global concern about the aggressive US Federal Reserve monetary tightening (winding down its quantitative easing program by another chunk of USD $10 billion as well as possible US interest rate hikes in 2015 and 2016).

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On Wednesday (26/03), most emerging Asian currencies appreciated against the US dollar as the region's shares hit a two-week high on upbeat US economic data in combination with reduced concern over the crisis in Crimea (Ukraine). However, the Indonesian rupiah exchange rate was one of the exceptions to this trend on today's trading day. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.16 percent to IDR 11,412 at 16:15 local Jakarta time. Meanwhile, the Chinese yuan recovered some of its earlier losses.

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Fitch Ratings, one of the three major global credit rating agencies, said that its latest annual survey on economic prospects and the business climate in Indonesia indicates an optimistic view. Respondents in the survey, mostly CEOs and Division Heads at financial institutions, companies, government and media, were asked 11 questions about the Indonesian economy, reformation and prospects for the next five years. Andrew Steel, Managing Director Head of Asia Pacific Corporate Ratings Group, presented results of the survey.

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Imports of oil will accelerate to 1.6 million barrels per day (bpd) by 2020 if fuels continue to be subsidized by the Indonesian government. This development will seriously burden Indonesia's trade balance (and current account). In 2013, Indonesia posted a trade deficit of USD $12.6 billion in the oil & gas sector. Due to improved performance in the non-oil & gas sector, the overall trade deficit was kept at USD $4.06 billion. Besides placing downward pressure on the rupiah exchange rate, expensive subsidies also burden the state budget.

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