Domestic Foreign Exchange Market Reaction on Indonesian Presidential Elections in 2004, 2009 and 2014

The foreign exchange market has an important role in the Indonesian economy and trading as the institution that manage the international funds transfers. Transfer of funds involving transactions between two or more states in a trade will cause movements or fluctuations in the state's currency against the currencies of other states as the results. Fluctuations in the value of a state's currency against the currencies of other states could be caused by extreme events. Those events are the variety of extreme economic issues and politics, such as the presidential election event. The purpose of this research is to analyze the existence of abnormal returns on foreign exchange-related events of the presidential elections in 2014, and to analyze the differences in return for foreign currency before and after the presidential elections of 2014. The results showed that the there are differences in the average of the abnormal return before and after the presidential elections in the Indonesian foreign exchange market, especially for the foreign exchange of Singaporean dollar and the United States dollar. The political events of presidential election, based on the results obtained in this research, have the tendency to influence the foreign exchange market in Indonesia. Foreign currencies are stable and did not have a significant effect in the face of presidential election events, one of those foreign currencies is European's EURO.