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 continues to be a cause for concern as the currency immediately depreciated heavily after trading opened on Monday (08/06). Based on the Bloomberg Dollar Index, the rupiah hit a new record-low of IDR 13,382 per US dollar in the post Asian Financial Crisis era at 9:10 am. Due to a lack of domestic and international positive sentiments only central bank intervention can support the country's ailing currency. Meanwhile, Indonesian stocks followed suit by declining 0.70 percent shortly after opening.

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The Indonesian rupiah continued to set a new record-low in the post Asian Financial Crisis era. Based on the Bloomberg Dollar Index, the rupiah depreciated 0.07 percent to IDR 13,290 per US dollar on Friday (05/06), the weakest level since 1998. A number of factors are responsible for this weak performance. These include higher bond yields, US dollar demand due to dividend repatriation and debt repayment, Indonesia’s high inflation, uncertainty about the Greek debt crisis and looming higher US interest rates.

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As the Indonesian rupiah continued to depreciate on Thursday (04/06), touching a 17-year low, a central bank official tried to ease concerns by stating that Bank Indonesia is always in the foreign exchange and bond markets to monitor movements and ease volatility. On Thursday morning the bond yield, which has been rising since Friday (29/05), was 8.198 percent. Based on the Bloomberg Dollar Index, Indonesia's rupiah had depreciated 0.11 percent to IDR 13,245 by 11:10 am local Jakarta time.

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The Indonesian rupiah started the new trading week on a negative note. By 10:45 am local Jakarta time, the rupiah had depreciated 0.17 percent to IDR 13,181 per US dollar according to the Bloomberg Dollar Index. The primary reason for this performance is that the US dollar has strengthened globally after Federal Reserve Chair Janet Yellen stated that she is convinced that the world will see the first US interest rate hike in almost a decade before the end of the year (provided that US economic data continue to improve).

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Indonesian stocks continued to rise one day after the country’s central bank (Bank Indonesia) announced to leave the interest rate policy unchanged and, instead, choosing to loosen its macro-prudential policy by revising the LDR-RR regulation, LTV policy for mortgage loans and down payments on automotive loans, hence increasing liquidity and boosting credit growth in the banking sector. Indonesia's rupiah, however, depreciated sharply after the market opened on Wednesday (20/05) due to the strong US dollar.

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Indonesia’s rupiah continued to weaken on Monday’s trading day (18/05). The Indonesian rupiah had depreciated 0.22 percent to IDR 13,113 per US dollar by 12:08 pm based on the Bloomberg Dollar Index as market participants are waiting for results of the central bank’s Board of Governor’s Meeting, scheduled for Tuesday (19/05). At this meeting Indonesia’s central bank (Bank Indonesia) will discuss and determine its stance on the country’s interest rate environment. Currently, the key rate (BI rate) is set relatively high at 7.50 percent.

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The central bank of Indonesia (Bank Indonesia) is currently dealing with a dilemma. On the one hand, its relatively high interest rate environment (with the benchmark BI rate at 7.50 percent) is partly responsible for the country’s slowing economic growth as credit expansion is curtailed and economic activity declines. On the other hand, Bank Indonesia’s high BI rate is needed to safeguard Indonesia’s financial stability as inflation is still above the central bank’s target, the current account deficit nearly unsustainable, and capital outflows loom.

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The Indonesian rupiah is again depreciating. On Tuesday (12/05), the rupiah had depreciated 0.39 percent to IDR 13,206 per US dollar by 11:51 am local Jakarta time based on the Bloomberg Dollar Index. The primary reason for this weak performance today is US dollar demand amid heightened concerns about Greece’s debt situation. Talks between the Greek leftist government and its international partners are heading toward a crucial phase. As a result, the greenback is appreciating against almost all Asian currencies.

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Most Southeast Asian stock markets declined ahead of the two-day policy meeting of the US Federal Reserve which started today (28/04). Indonesia’s benchmark Jakarta Composite Index (IHSG) managed to limit losses. After the 3.49 percent fall yesterday, the IHSG was down 1 percent after the first trading session today. However, near the closure of the market the index improved markedly resulting in a small loss of 0.06 percent only. Due to severe losses over the past couple of trading sessions, some oversold blue chip shares became attractive.

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It was a relief for investors to learn that the benchmark stock index of Indonesia (Jakarta Composite Index, or IHSG) rebounded on Thursday (09/10) after having experienced a sharp decline on the previous day. The IHSG was supported by rising Asian stocks after indices on Wall Street had surged on Wednesday (08/10). Wall Street was up as minutes of the latest Federal Reserve meeting signalled that US interest rates will remain low 'for a while'. Another positive factor was that today’s appreciation of the Indonesian rupiah exchange rate.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) took another dive on Wednesday (08/10). The decline was not only caused by the negative influence of declining stock indices in the USA and Europe on the previous day, triggered by the downgraded global economic growth forecast released by the International Monetary Fund (IMF) but also because the market responded negatively to the voting result for the post of speaker of the People’s Consultative Assembly (or MPR).

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Indonesian stocks plunged considerably on Thursday (02/10). The country’s benchmark stock index (Jakarta Composite Index, abbreviated IHSG) declined 2.73 percent to 5,000.81 points, the largest drop in almost six months. This poor performance was caused by both external and internal factors. Externally, various weak economic data from the USA and Europe as well as an appreciating yen impacted negatively on Asian stock indices. Internally, market participants responded negatively toward the inauguration of the new parliament.

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Although Indonesia’s September 2014 inflation (0.27 percent m/m) and appreciating rupiah exchange rate had a positive impact on the performance of Indonesia’s benchmark stock index (Jakarta Composite Index, abbreviated IHSG) on Wednesday (01/10), its gain was limited by declining indices on Wall Street on the previous day as well as Indonesia’s August trade deficit (USD $318.1 million), which resulted in foreign net selling of worth IDR 388 billion of Indonesian stocks. The IHSG climbed 0.06 percent to 5,140.91 points.

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Indonesia’s fuel subsidy policy is estimated to have a large influence on investors’ confidence in the financial or fiscal fundamentals of Southeast Asia’s largest economy and thus on the performance of the local stock index and currency. New president elect Joko Widodo (popularly known as Jokowi) is expected to raise prices of subsidized fuels after taking office in late October 2014 in an attempt to combat the country’s wide current account deficit (mainly caused by expensive oil imports to meet domestic fuel demand).

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The Indonesian rupiah exchange rate depreciated 0.54 percent to IDR 11,822 per US dollar in the past week (based on the Bloomberg Dollar Index). Several internal and external factors influenced the currency’s performance over the past week, such as increased US dollar demand from local Indonesian companies, Bank Indonesia’s decision to leave the BI rate unchanged and the improving US economy. Lastly, the structural current account deficit (triggered by expensive oil imports) remains a problem for investors.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) ended at a record high on Wednesday (03/09) as market sentiments were positive after the Indonesian government raised USD $1.5 billion from 10-year dollar-denominated Islamic bonds (known as sukuk) on Tuesday (02/09). Foreign investors submitted USD $10 billion worth of bids, six times the amount offered, showing that they are confident about the country’s current and future economic prospects.

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Contrary to the positive performance of the benchmark stock index of Indonesia on Monday’s trading day (01/09) and despite positive domestic economic data released by Statistics Indonesia, the Indonesian rupiah exchange rate depreciated 0.22 percent to IDR 11,716 per US dollar based on the Bloomberg Dollar Index on Monday (01/09). The main reason for the currency’s depreciation is the strengthening US dollar as US economic data are improving and inflation is slowing in the Eurozone.

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The benchmark stock index of Indonesia (known as the Jakarta Composite Index, abbreviated IHSG) rose 0.36 percent to 5,162.25 points on Wednesday (27/08), effectively ending a three- day losing streak as positive US economic data and increased speculation that the Indonesian government will tackle the fuel subsidy issue. Meanwhile, the Indonesian rupiah exchange rate appreciated 0.22 percent to IDR 11,682 per US dollar based on the Bloomberg Dollar Index, particularly on high hopes that Indonesia’s fuel subsidies will be reduced.

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The Indonesian rupiah exchange rate depreciated 0.35 percent to IDR 11,714 per US dollar according to the Bloomberg Dollar Index on Monday (25/08) as the positive market sentiments that were caused by Indonesia’s Constitutional Court that rejected Prabowo Subianto’s claim that the 2014 presidential election was invalid due to massive fraud, eased. Market participants were again looking at the domestic economic condition as well as international developments that are considered to impact on the performance of Indonesia’s currency.

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