Although Indonesia is considered as one of the Asian economies that is particularly vulnerable to a Greek exit from the euro (‘Grexit’), Indonesian stocks and the rupiah did not decline as heavily as other emerging market assets on Monday’s trading day (29/06), the first trading day after the collapse of talks between debt-ridden Greece and its international creditors. Indonesia’s benchmark Jakarta Composite Index fell 0.82 percent to 4,882.59 points while the rupiah depreciated 0.24 percent to IDR 13,339 per US dollar (Bloomberg Dollar Index).

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Most stock indices across the world continued to fall on Friday (26/06) on heightened concern that debt-ridden Greece will fail to reach an agreement with its international creditors. The deal is necessary for Greece to obtain bailout funds in order to avoid a default on its debt to the International Monetary Fund (IMF) due on 30 June 2015. A default could mean a Greek exit (Grexit) from the Eurozone and jeopardizes stability of the whole financial system of the region. Talks between both sides will continue into the weekend.

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As Greece and its international creditors have failed to reach an agreement (yet) regarding the disbursement of crucial bailout funds for the debt payment of debt-ridden Greece to the International Monetary Fund (IMF) later this month, most Asian stocks fell on Thursday (25/06) in cautious trading. Indonesia’s benchmark stock index (Jakarta Composite Index) fell 0.68 percent to 4,920.04 points, while the rupiah depreciated 0.20 percent to IDR 13,328 per US dollar according to the Bloomberg Dollar Index.

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Contrary to the performance of most other Asian stock indices, Indonesia’s benchmark Jakarta Composite Index fell 0.52 percent to 4,959.25 points on Monday (22/06). Other Asian markets were supported by renewed hopes of averting a Greek exit (Grexit) from the Eurozone after the debt-ridden country gave new proposals to its creditors in the Eurozone over the past weekend. According to the Greek government these proposals are mutually beneficial. Ahead of the ‘emergency’ meeting today, the euro and European stocks tend to rise heavily.

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Indonesian stocks rebounded on Tuesday (16/06). The country’s benchmark Jakarta Composite Index rose 0.72 percent to 4,872.60 points supported by foreign net buying and rebounding from yesterday’s 13-month low position. Middle and longer term investors now have great opportunity to find stocks at bargain prices (particularly those stocks that are not too exposed to the weakening rupiah). However, trading volume was low at about 60 percent of the past 30-day average thus indicating that market participants remain wary.

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The central bank of Indonesia (Bank Indonesia) is expected to leave its interest rate regime unchanged at Thursday’s Board of Governor’s meeting. Currently, Bank Indonesia’s key interest rate (BI rate) stands at 7.50 percent, the overnight deposit facility at 5.50 percent, and the lending facility rate at 8.00 percent. The central bank seems committed to this relatively high interest rate environment as the country’s inflation accelerated to 7.15 percent (y/y) in May, while the rupiah touched a 17-year low on 9 June 2015.

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In line with the performance of most other stock indices in Asia today (15/06), Indonesia’s benchmark Jakarta Composite Index (IHSG) fell over one percent in the first trading session. Primary reasons for this weak performance are concerns about stalled negotiations between Greece and its Eurozone creditors. Negotiations broke down without a deal on the bailout aid causing raising worries about a Greek default on its debt (a payment is due at the end of this month) as well as a Greek exit from the Eurozone (“Grexit”).

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Immediately after the opening of trade on Wednesday (10/06), Indonesian stocks rebounded sharply. Yesterday, Indonesia’s benchmark stock index (Jakarta Composite Index) had fallen 2.30 percent due to worries about looming higher US interest rates later this year, the Greek debt crisis in the Eurozone, heavy rupiah depreciation, and weak domestic macroeconomic data (such as Indonesia’s high inflation, disappointing Q1-2015 economic growth, the still wide current account deficit, and the central bank’s falling forex reserves).

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Indonesia's central bank (Bank Indonesia) is well aware of the continuation of the "currency war" as a side-effect of further monetary tightening in the USA. Bank Indonesia Governor Agus Martowardojo said on Monday (08/06), quoted by state news agency Antara, that he sees a currency war continuing over the next three years provided that the Federal Reserve starts to tighten its monetary approach gradually. Markets expect the Fed to raise US interest rates in September 2015.

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Indonesian stocks and the rupiah are experiencing severe pressures at the start of the new trading week. Indonesia’s benchmark stock index (Jakarta Composite Index) declined 1.68 percent to 5,014.99 points (a seven-month low), while the rupiah depreciated 0.71 percent to IDR 13,385 per US dollar according to the Bloomberg Dollar Index on Monday (08/06). As such, the rupiah extended its record-low closing in the post Asian Financial Crisis era. Indonesian stocks and the rupiah are the worst performing Asian assets.

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The Indonesian rupiah exchange rate appreciated 0.14 percent to IDR 11,581 per US dollar on Wednesday based on the Bloomberg Dollar Index. The currency is now at its strongest level since 25 November 2013 as it regained trust of international investors. In 2013, the rupiah weakened sharply after speculation emerged that the Federal Reserve would scale back its quantitative easing program. In combination with the country's record high current account deficit and high inflation it led to large capital outflows from Southeast Asia's largest economy.

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Although the gap on 4,575-4,579 was closed, Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) was given limited room to go up further as the performance of global stock indices did not support a bigger rebound. On the contrary, despite the 0.37 percent rise of the IHSG to 4,601.28 points on Tuesday (04/03), there are still pressures that may push the index down in the days ahead. Amid the political conflict in the Ukraine, Wall Street fell on Monday (03/03), which led to profit taking in the first trading session.

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The Indonesian rupiah exchange rate had depreciated (0.15 percent) to IDR 11,665 per US dollar on Thursday (27/02), 15:00 local Jakarta time, based on the Bloomberg Dollar Index. Governor of Bank Indonesia Agus Martowardojo stated yesterday to expect the currency to stabilize near current levels in line with its economic fundamentals ahead of looming further Federal Reserve tapering. Analysts estimate that Indonesia's trade balance might deteriorate in January 2014 as the impact of the mineral-ore export ban kicks in.

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The Indonesian rupiah exchange rate continued its recent appreciating trend on Monday (17/02). Based on the Bloomberg Dollar Index, the currency strengthened 0.39 percent to IDR 11,785 per US dollar at 16:00 local Jakarta time. Main reason for this renewed confidence in the rupiah is Indonesia's current account deficit, which eased significantly by the end of 2013. According to Bank Indonesia, the deficit eased from 4.4 percent of gross domestic product (GDP) in the second quarter of 2013 to 1.98 percent of GDP in Q4-2013.

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Despite the release of positive macroeconomic data on Monday (03/02), Indonesia's rupiah exchange rate depreciated 0.22 percent to IDR 12,240 per US dollar based on the Bloomberg Dollar Index. China’s Manufacturing PMI fell to a six-month low of 50.5 in January and put pressure on stocks and currencies in emerging markets. Moreover, the Federal Reserve's further reduction of its quantitative easing program (to USD $65 billion per month) continues to strengthen the US dollar at the expense of emerging currencies.

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In the Bloomberg Dollar Index, Indonesia's rupiah exchange rate depreciated 0.47 percent to IDR 12,238 per US dollar on Monday (27/01). The decline of the rupiah was in line with today's trend of weakening Asia Pacific currencies (against the US dollar). Meanwhile, the central bank's mid rate (the Jakarta Interbank Spot Dollar Rate or JISDOR) depreciated 0.17 percent to IDR 12,198 per US dollar. Market participants are concerned about Indonesia's January 2014 inflation and further Federal Reserve tapering.

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In the fourth week of January, Bank Indonesia's rupiah exchange rate (the Jakarta Interbank Spot Dollar Rate or JISDOR) depreciated 0.41 percent against the US dollar. This weakening trend of the rupiah was caused by various factors. Most importantly, the US dollar has been gaining strength against emerging currencies, including Indonesia, as speculation emerged that the Federal Reserve will curtail its massive monthly bond-buying program (quantitative easing) by more than just USD $10 billion per month.

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The Indonesia rupiah exchange rate depreciated 0.13 percent to IDR 12,181 per US dollar based on the Bloomberg Dollar Index on Friday (24/01). Asian currencies felt the impact of a contraction of Chinese manufacturing as HSBC’s preliminary Purchasing Managers’ Index slipped to 49.6 in January 2014. Meanwhile, US existing homes sales in December were best since 2006 while US jobless claims were near a six-week low. These data fuel speculation that the Fed will continue to wind down its bond-buying program.

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The Indonesia rupiah exchange rate depreciated 0.18 percent to IDR 12,165 at 16.30 local Jakarta time on Thursday (23/01), based on the Bloomberg Dollar Index. Main reason for this decline is concern that Indonesia's central bank (Bank Indonesia) will maintain its benchmark interest rate (BI rate) at 7.50 percent despite an expected increase in January inflation due to massive floods as well as higher industrial electricity and LPG prices. Indonesia's January inflation rate is estimated to be around 1 percent.

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Based on the Bloomberg Dollar Index, the Indonesia rupiah exchange rate had depreciated 0.18 percent to IDR 12,113 per US dollar at 14:45 local Jakarta time on Monday (20/01). The most important factor that caused this negative performance was China's slowing economic growth in quarter IV-2013. In the fourth quarter of 2013, China's GDP grew 7.7 percent, down from 7.8 percent in the previous quarter. This slowing growth indicates that China's economic 'recovery' is still fragile (China is among the five most important trade partners of Indonesia).

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