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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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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Indonesia’s rupiah depreciated to its lowest level since mid-December 2014 nearly touching the psychological level of IDR 13,000 per US dollar ahead of Federal Reserve Chairwoman Janet Yellen appearance before the US Senate Banking Committee and the US Congress (in a two-day meeting) to elaborate on the Fed’s stance on US interest rates. As US jobless claims fell more than expected, analysts believe that it will not take long before the US central bank introduces higher borrowing costs in the world’s largest economy.

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Despite further slowing economic growth in 2014 and possible rupiah depreciation ahead of higher US interest rates later this year, global ratings agency Moody’s Investor Service said that the outlook for Indonesian companies is stable in terms of foreign exchange risks. Brian Grieser, Vice President and Senior Analyst of Corporate Finance at Moody’s, believes that weak rupiah performance is manageable for most of these companies. Starting from mid-2013, Indonesia’s rupiah has depreciated significantly amid US monetary tightening.

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The European Central Bank’s decision to introduce a 60 million euro per month bond-buying program (quantitative easing) up to September 2016 - a move to boost the Eurozone economy - has caused positive sentiments in Indonesia as increased global liquidity is expected to benefit emerging markets. The benchmark stock index of Indonesia rose 1.35 percent hence hitting a new all-time high at 5,323.88 points. Meanwhile, the rupiah appreciated 0.23 percent to IDR 12,459 per US dollar based on the Bloomberg Dollar Index.

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Despite having intervened to support the rupiah exchange rate, Indonesia’s central bank announced that the country’s foreign exchange reserves rose USD $800 million to USD $111.9 billion at the end of December 2014. The rise was primarily due to foreign exchange income from Indonesia’s oil and gas exports as well as the withdrawal of government’s foreign debt. Tirta Segara, Executive Director of Bank Indonesia, said that foreign exchange savings and banks swaps with Bank Indonesia had also increased at the end of 2014.

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The Indonesian rupiah exchange rate appreciated against the US dollar on Thursday (08/01) amid mostly strengthening Asian equity and currency markets as a number of positive market sentiments arose (specifically the release of the Federal Reserve’s December minutes). According to the Bloomberg Dollar Index, Indonesia’s rupiah appreciated 0.48 percent to IDR 12,674 per US dollar. Meanwhile, Indonesia’s benchmark Jakarta Composite (stock) Index was up 0.25 percent (5,221.89 points) at the end of today’s trading day.

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Indonesia’s rupiah exchange rate continued to depreciate on Wednesday (07/01). Based on the Bloomberg Dollar Index, the currency had depreciated 0.66 percent to IDR 12,731 per US dollar by 15:50 pm local Jakarta time amid prolonged weak global sentiments. Falling oil prices signal sluggish global economic growth - with the exception of the US economy which is showing structural recovery and thus fuels expectation of higher US interest rates - and speculation that Greece may exit the Eurozone.

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On Monday (14/04), the Indonesian rupiah exchange rate depreciated 0.23 percent to IDR 11,440 per US dollar according to the Bloomberg Dollar Index. This performance was in line with most other emerging Asian currencies, which weakened against the US dollar due to broad strength in the greenback as well as risk aversion. The rupiah - still the best performing emerging Asian currency so far this year - depreciated on dollar demand from local importers (while state-run banks were reported to engage in rupiah buying).

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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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Despite technical indicators pointing toward a potential rise of Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG), foreign net selling on Wednesday's trading day (12/03) caused the 0.42 percent decline to 4,684.38 points. Only two sectors recorded a positive performance today: consumer goods and property. Companies that did particularly well were Danayasa Arthatama, Metropolitan Land, Agung Podomoro Land, Siantar Top, and Kedawung Setia Industrial.

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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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In 2013, Indonesia experienced a rough year in terms of stock trading. The world was shocked by Ben Bernanke’s speech in late May 2013 in which he hinted at an end to the Federal Reserve’s large monthly USD $85 billion bond-buying program known as quantitative easing. Through this program, cheap US dollars found their way to lucrative yet riskier assets in emerging economies, including Indonesia. But when the end of the program was in sight, the market reacted by pulling billions of US dollars from emerging market bonds and equities.

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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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