"The rupiah strengthened against the dollar in the domestic money market after the US Federal Reserve postponed a plan to raise its benchmark rate," money market observer Rully Nova of Bank Himpunan Saudara said here on Thursday.
The Feds policy has pushed investors to switch to developing countries assets, including those of Indonesia, through bonds and shares, he said.
"Foreign investors have again invested their capital in domestic bonds and shares after there had been capital flight, following rumors that The Fed would raise its key rate," he said.
He added that Bank Indonesias decision to cut its key rate by 25 basis points to 6.75 percent on Thursday is another factor causing the rupiah to strengthen.
"If Bank Indonesia cuts its key rate, bonds will have the potential to strengthen. This speculation has encouraged foreign capital inflows and caused the rupiah to appreciate," he said.
On the other hand, the optimism of market players about the countrys manageable economic growth is another factor supporting the rupiah to move on a positive track, he said.
Chief researcher at Monex Investindo Futures Ariston Tjendra said the dollar lost the most ground against the vast majority of world currencies in recent months after the Fed held its position and then reduced its future hike forecasts for this year.(*)
Editor: Heru Purwanto
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