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The Indonesian rupiah strengthened 72 points to Rp12,980 per dollar on Friday evening, compared to Rp13,052 per dollar the day before.
Developed countries decision to adopt a zero interest rate policy made the yield less interesting and money market investors diverted their funds to developing countries, money market observer Rully Nova said here on Friday.
“Yields in Indonesia, which still adopts a positive interest rate policy, have attracted investors to invest in rupiah-denominated assets,” he said.
On the other hand, the fact that sentiment regarding the Fed fund rate faded as several economic indicators did not fully recover has made the US dollar-denominated assets less attractive, he said.
After all, the rupiahs significant appreciation against the US dollar may have a negative impact on Indonesias export performance, he said.
“Hopefully, the fluctuation in the rupiahs strengthening will not be too wild and market agents and businesspeople will find it easy to predict it,” he said.
Market analyst Lukman Leong said the downward trend in Indonesias inflation rate this year is one of the factors behind the rupiah strengthening.
“The low inflation rate will prompt Bank Indonesia to further lower its interest key rate and consequently, lending rate will fall and domestic consumption will increase in favor of economic growth,” he said.
