Indonesian Stocks & Rupiah Weaken on New Bill and Wall Street Fall

Mainly due to declining Apple stocks, stock indices on Wall Street were down on Thursday. The Dow Jones Industrial Average fell 1.54 percent to 16,945.80 points, the Standard & Poor’s 500 dropped 1.6 percent to 1,965.99, and the Nasdaq fell 1.9 percent to 4,466.75 points.

Furthermore, market participants are concerned about the development of democracy in Indonesia as the country’s parliament passed a new bill on Friday morning that sets to end direct voting of local mayors, district heads and governors (instead leaving it to the regional legislatures).

By 11.50 am local Jakarta time zone, the benchmark Jakarta Composite Index had fallen 1.62 percent to 5,116.91 points.

Based on the Bloomberg Dollar Index, Indonesia’s rupiah currency had depreciated 0.33 percent to IDR 12,023 per US dollar by 11.50 am local Jakarta time zone on Friday. Besides the negative influence of the new bill, rupiah depreciation is also caused by the recently appreciating US dollar trend, brought on by an improving US economy and thus leading to speculation about a sooner-than-expected US interest rate hike by the Federal Reserve (while the bond-buying program is expected to end in October 2014). However, expectation about a looser monetary policy of China’s central bank (to boost the domestic economy) may limit depreciation of the rupiah.

Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.50 percent to IDR 12,007 per US dollar on Friday (26/09).

| Source: Bank Indonesia

 

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