Rupiah strengthens to Rp9,078/9,085 per dollar Tuesday

Jakarta (ANTARA News) - The rupiah rose 15 points to Rp9,078/9,085 per dollar in the Jakarta interbank spot market late Tuesday following Bank Indonesia (the central bank/BI)`s decision to raise its key interest rate earlier in the day.

BI`s board of governors decided at its meeting on Tuesday to raise its key rate by 25 basis points to 9 percent from 8.75 percent, citing future risks of inflationary pressure originating from global crude and food price turbulence and demand pressure.

The rise in the benchmark interest rate, locally known as BI Rate, prompted investors to buy the rupiah, the retail banking director of Bank Mega Tbk, Kostaman Thayib, said.

He said he believed foreign investors would continue to invest in the domestic market due to the higher BI Rate.

Foreign investment portfolios would continue to flow into the country, he said adding foreign investors believed the Indonesian economy would pick up despite a global economic slowdown.

Moreover, global economic growth had been shifting to Asia from the United States and Europe, he said.

The rupiah had earlier strengthened to Rp9,070 per dollar before it closed at Rp9,078 per dollar as investors reduced their rupiah buyups ahead of Tuesday`s closing session.

He said the rupiah still had room to strengthen to Rp9,000 in the days ahead thanks to positive market sentiments including the return of local funds invested abroad.

The global crude prices which tended to fall to US$120 a barrel at present would also boost the rupiah to strengthen further, he said.

"We are optimistic the rupiah will hit Rp9,000 per dollar. It is merely a matter of time for the local unit to reach this level," he said.(*)

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