Statistics Indonesia (BPS) announced on Monday (16/03) that Indonesia posted a USD $738.3 million trade surplus in February 2015, the country’s third consecutive monthly trade surplus, and higher than the forecast of Indonesia’s central bank (Bank Indonesia) and a Reuters poll which both estimated a surplus in the range of USD $500 and $520 million. The surplus was also larger than the USD $709.4 million trade surplus posted in the first month of 2015. The February surplus was particularly the result of declining imports.

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After a series of good economic data (particularly US employment) the market expects that the Federal Reserve will raise its key interest rate in the second or third quarter of 2015 thus providing ammunition for bullish US dollar momentum (hovering at an 11-years high). Due to the expected higher yield in the USA, capital is flowing back to the world’s largest economy at the expense of emerging market currencies, including the Indonesian rupiah exchange rate which has depreciated 6 percent against the US dollar this year so far.

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Regarding Indonesia, the spotlight remains sharply focused on the drastically depreciating rupiah exchange rate. As speculation is growing that the US Federal Reserve will soon raise its interest rate regime, emerging market assets (both currencies and stocks) tend to weaken. However, although most Asian emerging currencies are weakening against the US dollar, the rupiah is particularly vulnerable as Indonesia is plagued by a wide current account deficit, which informs investors that the country is relying on foreign capital inflows.

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Indonesian stocks and the rupiah exchange rate are feeling the negative impact of the bullish US dollar on Monday (09/03) after stronger-than-expected US payrolls fuel expectation that the US Federal Reserve may start to raise its key interest rate in June. Moreover, last week Fed Chair Janet Yellen had already signalled to Congress that the US central bank may lessen its ‘patient stance’ on a looming interest rate hike. The benchmark Jakarta Composite Index fell 1.25 percent to 5,445.84 points on Monday’s first trading session (09/03).

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Indonesian authorities continue their efforts to ease people’s concerns about the impact of a weak rupiah on the Indonesian economy. In fact, authorities emphasize that a weak rupiah will improve the country’s trade and current account balance as Indonesian exports become more competitive. Over the past week the rupiah depreciated about 1 percent against the US dollar. Since the start of 2015, Indonesia’s rupiah has tumbled 4.4 percent against the greenback, hence being one of the worst performing emerging Asian currencies this year

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As the Indonesian rupiah exchange rate depreciated beyond the psychologically-sensitive IDR 13,000 per USD threshold on Wednesday (05/03), both Indonesian Finance Minister Bambang Brodjonegoro and Bank Indonesia Governor Agus Martowardojo stated that there is no need for panic as the performance of the rupiah against the US dollar is still in line with the performance of other currencies versus the US dollar. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.28 percent to IDR 13,028 by 13:35 pm local Jakarta time.

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While most Southeast Asian stock markets and emerging Asian currencies strengthened on Tuesday (03/03) on the back of a rebounding yen and - contrary to expectation - the decision of the Reserve Bank of Australia (RBA) to leave its cash rate a record low of 2.25 percent, Indonesian stocks and the rupiah performed rather flat. The benchmark Jakarta Composite Index fell 0.06 percent to 5,474.62 points, while the Indonesian rupiah rate appreciated 0.01 percent to IDR 12,969 according to the Bloomberg Dollar Index.

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The Indonesian rupiah exchange rate depreciated 0.79 percent to IDR 12,932 per US dollar according to the Bloomberg Dollar Index on Friday (27/02), its weakest level since end 2008, after the country’s central bank (Bank Indonesia) said it would not intervene too much to support the currency. Bank Indonesia said that it has no target level for the rupiah and will not go against the market. For the market these are signals that the central bank is comfortable with a weaker currency as that would improve the trade balance.

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After Federal Reserve Chairwoman Janet Yellen indicated that the US central bank will be patient in raising the interest rate environment in the world’s largest economy, Indonesian assets gained on Wednesday (25/02). Both the benchmark Jakarta Composite Index and rupiah exchange rate strengthened 0.51 percent yesterday. Apart from increased speculation that the Fed will not raise interest rates before summer, expectation that Greece will avoid a disastrous default brought more positive market sentiments.

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In line with most Southeast Asian stock markets and currencies, Indonesian stocks and the rupiah were rather flat with a tendency to weaken slightly on Tuesday (17/02). Most investors seem to avoid trading in this short trading week (On Thursday 19 February markets will be closed due to Chinese New Year celebrations). Moreover, market participants in Indonesia are waiting for the central bank’s interest rate decision later today. Lastly, failed talks between Greece and its creditors on Monday dented sentiment across Asia.

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Both the Indonesian rupiah exchange rate and stocks continued to fall on Tuesday (06/01) as global conditions remained unconducive. Indices on Wall Street had declined sharply yesterday as the global oil prices fell below USD $50 per barrel fueling concerns about a weaker global economy. Similarly, most Asian stock indices declined as Japan's yen appreciated and energy stocks were sold by investors. Indonesia’s benchmark Jakarta Composite Index fell 0.98 percent to 5,169.06 points.

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Indonesia’s benchmark stock index (Jakarta Composite Index) fell 0.43 percent to 5,220.00 points on Monday (05/01) amid profit taking on a relatively quiet trading day on the Indonesia Stock Exchange. Meanwhile, the Indonesian rupiah exchange rate depreciated 0.55 percent to IDR 12,614 per US dollar according to the Bloomberg Dollar Index as concerns about Greece exiting the euro intensified and boosted US dollar demand. Moreover, market participants were still reacting to Indonesia’s latest trade and inflation data.

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Indonesia’s rupiah exchange rate and stocks opened stable on Wednesday (17/12) after two days marked by severe pressures on emerging market assets. By 11:30 am local Jakarta time, Indonesia’s rupiah was down 0.09 percent to IDR 12,736 per US dollar (according to the Bloomberg Dollar Index), while Indonesian stocks were up 0.41 percent by the same time. Yesterday, the rupiah nearly touched IDR 13,000 per US dollar (its lowest level since the Asian Financial Crisis in 1997-1998), before the central bank decided to support the currency.

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Amid weakening emerging Asian currencies, Indonesia’s rupiah exchange rate touched a six-year low on Friday (12/12) after US consumer spending rose in November while US jobless claims fell (signalling a strong recovery in the world’s largest economy). Based on the Bloomberg Dollar Index, the rupiah depreciated 0.95 percent to IDR 12,467 per US dollar on Friday. Besides the impact of the US dollar’s bullish momentum, the rupiah also weakened on year-end US dollar demand from local companies for debt payments.

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Contrary to the previous trading day, most emerging Asian currencies strengthened against the US dollar on Tuesday (09/12) supported by the yen’s advance as falling oil prices dented risk appetite. Based on the Bloomberg Dollar Index, Indonesia’s rupiah appreciated 0.47 percent to IDR 12,331 per US dollar today. Despite local firms’ increased US dollar demand to settle debt before the year-end, market participants were happy to learn that Indonesia’s central bank is active in the foreign exchange market to guard the currency.

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The Indonesia rupiah exchange rate appreciated slightly on Tuesday (02/12). By 12:50 pm local Jakarta time, the currency had appreciated 0.03 percent to 12,277 per US dollar according to the Bloomberg Dollar Index. Yesterday, Indonesia’s currency had depreciated to the lowest level since January 2014 after official government data showed that inflation had accelerated sharply, while exports contracted more than expected, implying that the country’s wide current account deficit remains troublesome.

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In line with most other Asian emerging currencies, Indonesia’s rupiah exchange rate depreciated on Friday (28/11). Market players continue to buy US dollars amid falling oil prices. Japan’s yen even fell to a seven-year low against the US dollar after government data showed that household spending declined four percent (y/y) and inflation slowed in the world’s third-largest economy. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.22 percent to IDR 12,204 per US dollar by 15:35 pm local Jakarta time.

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The Indonesian rupiah exchange rate depreciated 0.09 percent to IDR 12,164 per US dollar on Tuesday (25/11) according to the Bloomberg Dollar Index. The performance is caused by local companies’ month-end US dollar demand as well as US dollar buying by Indonesia’s central bank. Although unconfirmed, it is speculated that the central bank is boosting its foreign exchange reserves ahead of a looming external shock triggered by higher US interest rates in the second or third quarter of 2015.

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Amid mostly gaining stock markets in Southeast Asia on Tuesday (11/11), the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) rebounded sharply after several days of declines. Most Indonesian blue chip stocks rose considerably after having tumbled in recent days. Positive market sentiments were caused by Joko 'Jokowi' Widodo’s participation in the Asia Pacific Economic Cooperation (APEC) summit in Beijing as well as news that both camps in Indonesian parliament have agreed to work together.

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Although we initially expected that the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) would be supported by the various macroeconomic data (inflation, trade balance, and manufacturing activity) that were released by Statistics Indonesia today, the opposite is what happened. The index went into red territory amid profit taking, although the bond market in fact strengthened and foreign investors recorded net buying at IDR 224 billion (USD $18.7 million).

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