Capital inflows boost rupiah: BI

Capital inflows boost rupiah: BI

Dow Jones, Jakarta

Bank Indonesia isn't worried over the rupiah's recent sharp rise
against the dollar and will leave it up to the market to
determine an appropriate level for the local currency, the
central bank's Governor Sjahril Sabirin said on Monday.

The central bank governor added that the rupiah's recent
strength is due to improving market sentiment toward Indonesian
investments.

The rupiah rose to new 10-month high of Rp 8,675 to the dollar
on Monday.

Worries over the possibility of a violent backlash over the
U.S.-led war in Iraq sent the local currency lower to 9,095
earlier this month.

But anti-war protests went off peacefully, which encouraged
foreign investors to buy Indonesian portfolios that are offering
favorable returns.

Some analysts have expressed concern that the rupiah's sharp
rise may hurt Indonesian exports, which are already facing
weakening demand from the country's main export destinations,
such as the U.S. and Japan.

Some dealers have said Bank Indonesia may intervene to stem
the rupiah's rise as it is trading outside the 8,800-9,200 range
that the central bank had forecast for this year.

Sjahril said that the central bank will leave the rupiah's
exchange rate to market forces, as long as it isn't "too
volatile."

Looking ahead, Sjahril said that he expected market sentiment
toward the rupiah to remain positive, but didn't elaborate.