Rupiah Trades Near Seven-Year High as U.S. May Hold Policy Rate

Indonesia’s rupiah traded near a seven-year high on speculation the U.S. will keep interest rates near zero this week, boosting fund inflows into higher-yielding emerging markets.

The Federal Reserve will keep its target rate for overnight loans between banks between zero and 0.25 percent when it meets on April 27, according to all 80 economists in a Bloomberg News survey. The rupiah has gained 4.1 percent this year, the second- best performance among Asia’s 10 most-traded currencies as Indonesia’s benchmark interest rate of 6.75 percent attracted fund inflows.

“Money chasing higher yields will continue to flow into Asian economies because the U.S. will probably not increase its interest rate,” said Lindawati Susanto, head of treasury at PT Bank Resona Perdania in Jakarta. “The Indonesian growth story is also attracting investors.”

The rupiah was little changed from April 21 at 8,626 per dollar as of 9:14 a.m in Jakarta, according to data compiled by Bloomberg. Financial markets in Indonesia were closed on April 22 for a public holiday. The currency touched 8,621 on April 21, the strongest level since 2004.

Southeast Asia’s largest economy may grow 6.5 percent this year, Sugeng, the head of Bank Indonesia’s monetary policy bureau, said on April 13. Gross domestic product rose 6.1 percent last year, according to official data.

Overseas funds bought $145.5 million more Indonesian shares than they sold this month, exchange data show. Foreign holdings of the country’s goverment bonds rose 11 percent from the end of December to 217.29 trillion rupiah ($25.1 billion) as of April 20, according to the finance ministry’s website.


Bloomberg