News ID: 264132
Published: 0721 GMT January 10, 2020

Indonesia rupiah jumps after bank signals currency intervention unlikely

Indonesia rupiah jumps after bank signals currency intervention unlikely
The Bank Indonesia headquarters in Jakarta, Indonesia (DIMAS ARDIAN/BLOOMBERG)

Indonesia’s central bank expects the nation’s currency to notch up further gains after it rallied to the highest level in almost 21 months on the improved outlook for Southeast Asia’s largest economy and growing risk appetite among global investors.

The rupiah was Asia’s top performer on Friday, advancing as much as 0.6 percent to 13,765 to a dollar, the highest intraday level since April 2018. The currency is also set for a sixth week of gains, the longest winning streak since April 2017, according to data compiled by Bloomberg.

Bank Indonesia will allow the rupiah to gain further “in accordance with the market mechanism, as long as the volatility is manageable,” Nanang Hendarsah, executive director for monetary management at the central bank, said in a text message on Friday. A narrowing current-account deficit as well as low and stable inflation are helping the currency appreciate, he said.

Foreign investors were undeterred by the global uncertainty and were net buyers of 5.6 trillion rupiah ($407 million) of bonds from the secondary bond market on Thursday, Hendarsah said. The government’s first bond auction earlier this week attracted 81.5 trillion rupiah ($5.9 billion) of bids against a target to raise 15 trillion rupiah.

“Rupiah continues to benefit from positive risk tone and foreign investor inflows,” said Khoon Goh, head of Asia research at Australia and New Zealand Banking Group Ltd. in Singapore. “The currency is not overvalued, so there is still scope for more modest near-term strength, especially with BI unlikely to intervene to stem rupiah appreciation.”

The currency may still face headwinds as crude oil prices continue to rise, according to David Sumual, Jakarta-based economist at PT Bank Central Asia.

“The exchange rate is too strong,” Sumual said. “I’m more worried about the impact of rising oil prices to the fiscal policy and the rupiah, eventually.”

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