2018 Rupiah Exchange Rate Weakens, Stock and Bond Indices Fall

The weakening Indonesian Rupiah against the US dollar caused stock and bond price indices to decline throughout 2018. Global uncertainty surrounding The Fed's interest rate hikes and the threat of a US-China trade war triggered the depreciation of the Rupiah and other emerging market currencies, impacting the global financial market.

At the end of last year, the Rupiah closed at Rp 14,390 per US dollar, weakening by 6.16% compared to its year-end position of 13,555 per US dollar in the previous year. The Jakarta Composite Index (IHSG) of the Indonesia Stock Exchange closed at 6,194.5 at the end of 2018, a decrease of 2.54% from its 2017 year-end position of 6,355.65. Similarly, the Indonesia Bond Pricing Agency (IBPA) composite bond index fell by 0.86% to 240.9 at the end of 2018, from 242.98 at the end of the previous year.

The US central bank's target of two interest rate hikes and the continuing threat of a trade war will continue to affect the movement of the Rupiah, IHSG, and domestic stock indices. Socio-political conditions leading up to the presidential election and domestic economic growth will also influence the local financial market.