The rupiah traded at its highest level since July 2007 on Monday as foreign investors continued to snap up the nation’s financial assets, leading some Indonesian exporters to express concerns about the currency’s strength.
The rupiah touched 8,997 versus the dollar in morning trade before weakening to 9,014 by the stock market close. It rose along with international markets on news that Greece’s debt crisis was easing, making riskier assets more attractive.
The Jakarta Composite Index surged 1.3 percent to close at 2,881.3, rising for the first time in three days. Government bonds also gained.
Darmin Nasution, the acting governor of Bank Indonesia, urged exporters not to worry about the rupiah’s appreciation, stressing that it only briefly rose past the 9,000 level.
But Hassan Widjaja, the chairman of the Association of Indonesian Coffee Exporters (AEKI), said he was concerned that the rupiah’s strength could hurt exporters. “We are expecting the government to issue a policy regarding this situation, so it could actually help both farmers and exporters instead of sinking them,” he said.
The rupiah is Asia’s best-performing currency outside Japan over the past 12 months, climbing 25 percent.
Eric Alexander Sugandi, an economist at Standard Chartered Bank Indonesia, said the global economic recovery would continue to increase appetite for riskier assets, generating capital inflows and strengthening the rupiah, which he said was still undervalued.
“As the global economy has recovered, global investors, mainly from the United States, are looking to invest in emerging markets,” Eric said. “We target the rupiah to reach 8,800 at the year’s end.”
Holdings of rupiah debt totaled Rp 136.5 trillion ($15.15 billion) as of Thursday, up from Rp 108 trillion at the end of last year, according to the Finance Ministry’s Web site.
Overseas investors have bought $455 million more of local stocks than they have sold so far in 2010. Local-currency bonds have handed investors a 28 percent return in the past year, the most among Asia’s 10 largest economies excluding Japan, HSBC Holdings indexes show.
Richard Yetsenga, a global currency strategist at HSBC Holdings in Hong Kong, said signs that Greece’s fiscal crisis was easing boosted demand for higher-yielding assets, including in Indonesia.
“The Greece announcement has given all markets a burst higher,” he said. “Indonesia’s story itself is pretty straightforward. Its yields are high and inflation is low.”
Eric noted that the country’s economic fundamentals were strong.
“We have a healthy balance of payments, our inflation is rising but still manageable and the country’s risk is still low. This makes Indonesia an attractive place for investment among the emerging markets,” he said.