Most Asian markets started weak in the new trading week on persistent uncertainty about the timing of higher US interest rates after the US Federal Reserve decided to postpone a Fed Fund Rate hike last week. This context raises investors’ appetite for safe haven assets. By 13:45 pm local Jakarta time on Monday (21/09), Indonesia’s rupiah had depreciated 0.66 percent to IDR 14,469 per US dollar according to the Bloomberg Dollar Index, while the benchmark Jakarta Composite Index was down 0.22 percent to 4,370.63 points.

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Indonesia’s foreign debt growth slowed in July 2015 by 3.7 percent (y/y) to a total of USD $303.7 billion from a 6.3 percent (y/y) growth pace in the preceding month. Based on the latest data from Indonesia’s central bank (Bank Indonesia) the nation’s total external debt consisted of USD $134.5 billion public sector foreign debt and USD $169.2 billion private sector foreign debt. Both public and private sector foreign debt growth slowed in July (compared to June) as these sectors were hesitant to take on more debt due to the depreciating rupiah.

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After the Federal Reserve announced that it kept its key interest rate at the historically low level of 0.0-0.25 percent at the September policy meeting, most of Asia’s emerging market stocks were up on relief that their currencies are not to depreciate heavily (yet) due to the looming rate hike. Yesterday (17/09), the US central bank said it postponed further monetary tightening due to weakness in the global economy, unsettled financial markets, and low US inflation. However, a Fed Fund Rate hike is still likely to occur before the year-end.

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Morgan Stanley Investment Management, a leading global investment firm, said it now considers Indonesia’s rupiah and Malaysia ringgit as the most attractive emerging-market currencies. Both currencies have been the worst-performing Asian currencies against the US dollar this year amid looming tighter monetary policy in the USA, low commodity prices and China’s economic slowdown (as well as a political scandal in Malaysia). The ringgit has depreciated 21 percent, while the rupiah has weakened 16.2 percent against the US dollar since the start of the year. Both currencies are touching 17-year lows.

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Contrary to mostly rising Asian and global stock indices, Indonesia’s benchmark Jakarta Composite Index (IHSG) fell 0.34 percent to 4,332.51 points on Wednesday (16/09) as the rupiah continues to slide against the US dollar causing concern about corporate earnings of listed companies on the Indonesia Stock Exchange and eroding the value of Indonesian assets purchased by foreign investors. Outside Indonesia most markets were up as investors are in anticipation of a crucial two-day Federal Reserve policy meeting (16-17 September).

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Ahead of the Federal Open Market Committee (FOMC) meeting, the two-day policy meeting which starts today (16/09), the US dollar continues to appreciate against most currencies, including the Indonesian rupiah, as investors remain cautious ahead of a possible US interest rate hike. By 09:36 am local Jakarta time, the rupiah had depreciated 0.29 percent to IDR 14,450 per US dollar according to the Bloomberg Dollar Index, a fresh 17-year low.

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While most Asian stock indices were mixed, Indonesia’s benchmark Jakarta Composite Index rose 0.69 percent to 4,390.37 points on Monday (14/09) with foreign investors recording a net buy of IDR 91.2 billion (approx. USD $6.5 million). Meanwhile, ahead of a crucial Federal Reserve meeting, the Indonesian rupiah depreciated 0.08 percent to IDR 14,333 per US dollar according to the Bloomberg Dollar Index.

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Based on data from the Inter Dealer Market Association, Indonesia’s ten-year sovereign bond yield climbed 31 basis points since 4 September 2015 to 9.24 percent, its highest level since 2010, on Friday morning (11/09) amid concern about the ailing rupiah. The rupiah has been under pressure as emerging market currencies have become unattractive ahead of a looming US interest rate hike and China’s recent decision to devalue its yuan (triggering concern about a currency war among Asia’s emerging currencies).

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Indonesian stocks and the rupiah started weak on Thursday morning (10/09), the day after the Indonesian government unveiled its first economic policy package. In line with the trend in the whole region this morning, most (emerging market) assets in Asia are declining on weak Chinese and Japanese economic data. These weak data cause heightened concern about sluggish global economic growth.

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Indonesia’s foreign exchange reserves fell to USD $105.3 billion in late August 2015 (from USD $107.6 billion in the preceding month) as the government used foreign exchange (forex) for external debt payments while the central bank (Bank Indonesia) used part of the forex to intervene in the currency market in an effort to support the ailing rupiah rate which has been under severe pressure amid looming further monetary tightening in the USA and concern about the hard landing of China’s economy.

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Robust rupiah appreciation in the month of November 2018 has taken many people – such as policymakers, businessmen, and analysts, including us – by surprise.

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Stock markets in Asia are mixed, yet tepid on Friday (16/12) after the US Federal Reserve raised its interest rate regime for the second time in a decade on Wednesday (14/12). Although the Fed's move was widely anticipated (and therefore already "priced in" to a high degree) it still resulted in some capital outflows from Asia's stock markets on Thursday (13/12). Japan, as usual, is the notable exception as US dollar strength (or yen weakness) makes Japan's export-oriented stocks more attractive.

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Indonesian President Joko Widodo said market participants should reduce their focus on the US dollar as benchmark for Indonesia's rupiah currency. Instead of the US dollar, it is better to use China's renminbi, the European Union's euro, or Japan's yen as a benchmark for the rupiah as these rates better reflect the fundamentals of Southeast Asia's largest economy. The rupiah has come under pressure against the US dollar after Donald Trump's victory in the 2016 US presidential election.

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Many things happened this week. A devastating terror attack in Nice (France) killed at least 84 people, while - at the time of writing - a coup attempt occurred in Turkey (that seems to have failed). However, these events have little impact on the performance of global stocks and currencies (with the obvious exception of the Turkish lira). Wall Street touched record highs, while Indonesian stocks rose to a 13-month high and the Indonesian rupiah strengthened to a four-month high. Lets take a closer look at the performance of these markets over the past week.

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Over the last few months, we have seen some impressive gains in the Indonesian rupiah (IDR) relative to the US dollar (USD). When we compare the performance of the IDR against the rest of the emerging market space, we can see that its gains are behind only the Brazilian real (BRL) and the Malaysian ringgit (MYR) for the period. This has prompted a wave of foreign export purchases as Indonesian consumers look to take advantage of the stronger currency.

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Indonesian assets weakened on Friday (06/11) on expectation that US non-farm payrolls and US employment data would improve, suggesting that a Fed Fund Rate hike may occur in December 2015. Such expectations were correct. After Indonesian and other Asian markets had closed on Friday, the US Labor Department announced that October payrolls rose 271,000 (the largest increase this year), while the US unemployment rate touched a seven-year low at 5 percent. Furthermore, the average hourly earnings over the past 12 months climbed by the most since 2009.

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After a real roller coaster ride, Indonesia’s benchmark stock index (Jakarta Composite Index) climbed 0.35 percent to 4,446.20 points at the end of the trading week. The majority of key stock indices across the globe tended to strengthen on Friday after a week characterized by severe volatility amid concern about the economic situation in China.

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Although Indonesian stocks managed to rebound, the rupiah continued to depreciate against the US dollar today (25/08). However, rupiah weakening was limited as Bank Indonesia was closely monitoring and intervening in markets to support the rupiah. Based on the Bloomberg Dollar Index, the Indonesian rupiah depreciated 0.03 percent to IDR 14,054 per US dollar. As significant further rupiah weakening is assumed to seriously undermine confidence in the rupiah, the central bank’s intervention efforts are well received by investors.

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The Indonesian rupiah touched a 17-year low as the currency continued to depreciate amid persistent bullish US dollar momentum. The rupiah weakened to IDR 13,539 per US dollar according to the Bloomberg Dollar Index on Friday (31/07). The US Commerce Department announced on Thursday (30/07) that US gross domestic product (GDP) expanded at 2.3 percent (year-on-year) in the second quarter of 2015, giving rise to heightened expectation that the US Federal Reserve will raise its key interest rate soon.

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For most of this year, the Indonesian rupiah has met selling pressure against the US Dollar. Year-to-date price activity in the USD/IDR shows a rise from below IDR 12,250 to new highs above IDR 13,330 per US dollar. For Indonesian export companies, this is great news as it means that their products will be cheaper for foreign consumers to buy. For the domestic economy, this creates a different set of implications as it also makes it less likely that foreign investors will be looking to buy into Indonesian assets.

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