An easing of financial conditions across the global economy has given support to most currencies in Emerging Asia, which have generally been appreciating against the US dollar over the past few months. The big exception to this is the Indonesian rupiah, which following a strong rebound in early 2014, has lost more than 6% against the US dollar since the start of April. The weakness of the rupiah reflects two factors. First, concerns about the external deficit, after Indonesia in April recorded its biggest monthly trade deficit since last July. Second, uncertainty ahead of July’s presidential election, which now looks like being a much closer contest than looked likely just a few months ago. Although opinion polls still make Joko Widodo, the reform-minded mayor of Jakarta, favourite to win, his lead over Prabowo Subianto, a retired general from the Suharto era, has narrowed significantly.
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