Aditya Suharmoko, Jakarta – The rupiah fell below 10,000 against the US dollar Friday for the first time since last October, as strong economic growth amid the global economic downturn instills confidence and lures more capital inflows.
Indonesia's economy scored a respectable growth rate in the first quarter of 2009, third in Asia only behind China and India, at a time when most economies slumped amid the sweep of the global downturn.
Stable political conditions during the general elections, combined with recent cuts in the central bank's benchmark interest rate also contributed to a stronger rupiah.
The local currency strengthened 1.5 percent to 9,935 against the greenback at 5:11 p.m. in Jakarta, Bloomberg reported.
The currency earlier touched 9,920 against the dollar, its strongest showing since Oct. 24 last year at the height of global financial crunch.
Bank Indonesia has hinted it may further cut its rate as inflation continues to slow. Inflation in April rose 6.04 percent from a year earlier, the Central Statistics Agency (BPS) reported.
"Perception of Indonesia has been favorable – there is a rise in investment appetite and investors are looking for places (to put their money)," said Bank Danamon chief economist Anton Gunawan.
"They go to emerging markets, which offer a relatively high yield; but Eastern Europe is still damaged, while Latin America is not too good, partly due to the (H1N1) flu issue. This leaves Asia, where Indonesia has had a quite good performance.
"There's also a euphoria among local investors seeing the rupiah strengthening (who will then buy more of the currency to strengthen it even more)," he added.
"The fundamental rate of rupiah (per dollar) is 9,500. The trend is heading there," said Purbaya Yudhi Sadewa, chief researcher at Danareksa Research Institute.
"There are capital inflows, as we have positive growth in Southeast Asia. BI's recent statement that it would not intervene in the strengthening of the rupiah also creates positive sentiment."
Indonesia, Southeast Asia's largest economy, had 4.4 percent growth in the first quarter of 2009 from a year earlier, compared to 0.4 percent in the Philippines and contractions of more than 6 percent in Singapore, Malaysia and Thailand, Bloomberg reported.
As Indonesia has cushioned itself relatively well from the impacts of the global economic downturn, the International Monetary Fund (IMF) revised its economic growth forecast for Indonesia this year from 2.5 percent to between 3 and 4 percent.
BI also expects full-year growth within that range, saying the economy may expand close to the higher end of the scale, while the government estimates growth of between 4 percent and 4.5 percent.
"The IMF saw our economy was not as bad as expected," Anton said. "Although it isn't actually that bad, the still-strong economy makes it look far better."
While he was not sure whether the rupiah would stay below the 10,000 level for the long term, he said Danamon forecast the rupiah would reach 10,200 per dollar by the end of the year.
The rupiah's advance helped propel the country's benchmark stock index, capping its longest winning streak in almost two years.
The Jakarta Composite Index advanced 46.22 points, or 2.3 percent, to close at 2,078.93, rising for the eighth straight day in the longest rally since July 2007.
Data from Bloomberg shows the measure is the best-performing among Southeast Asian markets.