Indonesian rupiah 2013-16

 

A new currency for me, I was keen to get my G20 forecasting finished in 2010 so focused on the minimum of just the general country outlook.

Now I have a bit more time so am branching out. But it could be a bit of an experiment!

2013 

At the beginning of the 2013 the Rupiah was in a moderately good position reflection the many years of growth, even though this has tailed off a little towards the end of 2012.

However  it did decline a little vs other currencies in the first few months, representing some uncertainties about the future.

But the change was not significant and although there were some restraining effects there was also positive sentiment from some investors which protected the currency on the downside.

April and to a lesser extend May were relatively positive.

Certainly there was no cause for concern at this point. Nevertheless perhaps responding to wider issues, the central bank raised its rate slightly in mid June.

However the picture would take a turn for the worse, both in terms of statistics and external factors in July and even more so in August. So in July it raised it by ½ % and primarily to offset the rapidly declining Rupiah due to a general loss of faith in the regions following India’s problems,  at the end of August the rate was increased another ½%.  The deposit facility rate was also raised  and  a bilateral swap deal with the Bank of Japan extended.

 It was not enough, however and the Rupiah continued to decline with some rapid selling, falling nearly 6% in the month alone. Another arte rise was announced mid month. Unlike in India where the new bank head managed to stem the tide the Rupiah’s fall was continuous. It was being directly hit by much broader global concerns.

Although the decline is likely to even off in October there is still a lot of pressure on the currency.

The picture is slightly better in the final two months of the year with the possibility of supporting measures being more successful and the weakening of the particular conditions existing in September.

2014

 However is still a difficult environment and volatility will continue into the first quarter of  2014. 

There is an attempt to manage the overall financial position at this time as longer term structural funding pressures are evident. This might lead to some rapid inflation.

By the end of March there is a shift towards more restriction – and a re-evaluation of the long term prospects for the currency,

The next few months seem to be somewhat more stable

The picture is much more restrained in June. There may be more interest rate adjustments or other actions, though one assumes that nothing too radical will happen around the time of the election.

 August sees a shift in sentiment. There is a boost in trade in the currency and probably a bit of relaxation leading to more liquidity and perhaps more inflation.

This might however mean a need to more actively manage or control the currency again.

 

The themes continue throughout the end of the year. Although there are less globally motivated pressures, there are consequences to the recent expansion and inflation that will inevitably flow into rate and/or value,

2015

 

There is really not a lot of change in the picture in the first quarter of 2015 either.   Indeed the issues intensify again during this period – more than likely as a result of external, perhaps global factors. The inflationary picture looks set to continue too.

The second quarter sees a return to the focus on longer term structural issues and the balance of payments.

 While the background mood continues into July and August without much change in direction – there is the possibility of a sudden shock causing brief volatility in this period.

The end of the year is more moderated – there is unlikely to be too much movement in the currency in either direction.

Indeed December is probably one of the most stable months for some time.

2016

 

While the imbalances in the currency’s backing that are caused by social inequalities continue throughout 2016, the year does feature some changes in emphasis.

The balance of payments issues are again to the fore but there are positive signs that the currency is now in a stronger position. Perhaps it is the relative effect of what is happening elsewhere.

Certainly by March there is a change in mood.

This new environment stays in place for the whole of the first half of 2016. On balance it is positive, there are less external shocks and the currency does not seem to fluctuate much against the broader basket of currencies.

It seems as if there may be interest rate rises in July as there is evidence that some tightening will occur. The overall picture remains relatively positive and any tightening will not cause significant falls in the Rupiah now and up to September.

October and November give some hint of a reactivation of inflationary conditions. This might be expected to lead to some reduction in value – though curiously the picture does not seem to suggest that during this period. Indeed on balance there is a consolidation effect which normally suggests little change in value.

The last month of the year has more in common with the first half. The picture is mixed, but there seems to be some restriction in place and perhaps more interest rises. 

 

Currency proclamation: 3 Oct 1946, Jakarta ,set for 12 noon in the absence of a known time

Source Wikipedia