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Indonesia's Interest Rate saving the Rupiah [Jakar

Support for Indonesia’s rupiah, this month’s worst-performing Asian currency, is building as the nation’s assets attract funds from abroad and trading patterns suggest its decline is overdone.

The rupiah has fallen 2.2 percent this month, breaching the upper limit of its Bollinger band as it touched a seven-week low of 11,658 per dollar on April 23, according to data compiled by Bloomberg. The relative-strength index is also approaching levels that suggest a turnaround is likely, just as exchange data show overseas investors have been net buyers of Indonesian stocks for the past seven days.

After posting its strongest quarterly gain since 2009, Indonesia’s currency has weakened in April on concern data next month will show the current account deficit widening. Traders are speculating this will be offset by investors seeking to benefit from the nation’s relatively high interest rates.

“The pace of rupiah declines recently was quite fast so it’s not a surprise to see the move halting,” Koji Fukaya, chief executive and foreign-exchange strategist at FPG Securities in Tokyo, said in a phone interview on Thursday. “US interest rates are unlikely to rise soon, while Indonesia offers higher yields. So I don’t see the rupiah being sold aggressively from here.”

The dollar-rupiah rate breached the end of its Bollinger band on April 23, and remained above that level on Thursday, signaling the Indonesian currency’s decline may be overdone.

Source: http://www.thejakartaglobe.com/business/indonesias-interest-rates-seen-rupiahs-savior-slump/