Does Macro News Matter in the Exchange Rate Indonesia?

Abstract

News related to macroeconomic conditions has an impact on exchange rate movements in the foreign exchange market. The Exchange rate relations with macroeconomic news on the foreign exchange market only in the short term. This study aims to mitigate exchange rate relationships with macroeconomic news in Indonesia. The variable used is the index of domestic macroeconomic news, index of US and Chinese macroeconomic news and nominal exchange rates. The analytical tool used in viewing the relationship of macroeconomic news with exchange rates is Vector Autoregression (VAR). The results of the study show that the news of domestic macroeconomic conditions and the United States has an influence on exchange rate movements. Expectations of players in the foreign exchange market are based on macroeconomic news conditions. The policy to mitigate the effects of macroeconomic news is the stability of Indonesia's macroeconomic fundamentals. Maintaining the stability of macroeconomic fundamentals can have an effect on good news.