Indonesian Rupiah Continues to Weaken, Increasing Indonesia's Investment Risk Perception

Concerns over a trade war between the United States and China, coupled with the threat of Fed interest rate hikes, have created uncertainty in global financial markets. This has weakened the Indonesian Rupiah, leading to a heightened perception of investment risk in the domestic financial market.

According to Bloomberg data, the Credit Default Swap (CDS) for Indonesian government bonds in US dollars (10-year tenor) increased by 5.64 points (2.6%) to 221.98 on June 28, 2018, compared to the previous day's close, and also rose by 68.05 points (44.2%) since the end of 2017. This is the highest level since February 3, 2017.

Although Indonesia has achieved investment-grade status, its CDS remains high and has been trending upwards since early February, continuing through the first half of the year. This has impacted the Jakarta Composite Index (IHSG), which fell 8.75% to 5,799.24 during the first half of the year. Similarly, the Indonesian Rupiah depreciated by 5.4% to 14,330 per US dollar compared to its position at the end of 2017, and the Indonesia Composite Bond Index (ICBI) corrected by 4.28% to 233.02 from its year-end position.