Rupiah is Asia's Top-Performing Currency in 2009

Jakarta Globe, Patricia Lui

Seven out of 17 Bloomberg analysts have predicted the rupiah could rise to as high as 9,000 against the dollar by the end of 2010. (Reuters Photo)

Indonesia’s rupiah posted its biggest annual advance in seven years as signs the global economy is recovering from the recession encouraged overseas investors to return to emerging-market assets.

The currency climbed 16 percent in 2009, Asia’s best performer ahead of the South Korean won. Funds based abroad bought $1.4 billion more Indonesian stocks than they sold this year up to Dec. 29, while bonds have given the best returns among the top-10 Asian markets.

The rupiah will strengthen further in 2010 as the central bank seeks to cap inflation through lower import prices, according to Deutsche Bank AG.

“Inflows into stocks and fixed income in Indonesia and Korea this year have been huge,” said Mirza Baig, a Singapore- based currency strategist at Deutsche Bank, the world’s biggest foreign-exchange trader.

Bank Indonesia was “more accommodative of rupiah gains” compared with other Asian central banks “due to the pass through effect on inflation,” Baig said.

The rupiah rose 0.3 percent to 9,408 per dollar as of 2:38 p.m. in Jakarta, extending this month’s advance to 0.7 percent, according to data compiled by Bloomberg. It reached a high for the year of 9,280 in October, and may appreciate 4.5 percent to 9,000 by the end of 2010, according to the median forecast of analysts surveyed by Bloomberg.

For the decade, the currency was the worst performer in Asia, having slumped 24 percent.

The rupiah will have a “tendency” to strengthen early next year, Bank Indonesia Senior Deputy Governor Darmin Nasution said on Dec. 17.

Bloomberg

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