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.