Rupiah Hits One Year High

♠ Posted by Emmanuel in Southeast Asia at 5/11/2007 07:04:00 PM

In the wake of the Asian financial crisis a decade ago, the Indonesian rupiah suffered terrible devaluation when it fell to around 17,000 to the US$. It got hit worse than most other regional currencies. Fast-forward to 2007 and, my oh my, even the rupiah is gaining strength against the rapidly declining US$. How the mighty have fallen! How times have changed when Indonesia is now worried about excessive currency strength. From the Jakarta Post:

The rupiah reached its highest level against the U.S. dollar in almost a year Thursday, closing at Rp 8,740, as overseas investors retained their appetites for local stocks and bonds.

Statements from the Finance Ministry and the central bank to the effect that the rupiah remained within a comfortable range despite the surge also helped further propel the local unit against the greenback.

Dealers said that the statements eased concern among currency traders that the central bank would act to stymie the rupiah's rise so as to prevent Indonesian goods from becoming more costly overseas…

The rupiah could gain as much as 10 percent over the next three months, Varathan said, and was already up 3.1 percent in the last five trading sessions, including Thursday, the best performance among the 15 most-actively traded Asia-Pacific currencies.

Separately, BI Deputy Governor Aslim Tadjuddin said Thursday that foreign exchange reserves had risen to a record of about $51 billion, close to the bank's target for the end of the year.

The bank said in March that it expected reserves to total $51.1 billion by Dec. 31, versus $42.6 billion at the end of 2006.