"A series of (US) economic data, ranging from the manufacturing sector to the labor market, are disappointing, making the US dollar less attractive compared to higher yield currencies," Reza Priyambada of Asjaya Indosurya Securities said.
The Indonesian currency traded at Rp8,520 per dollar late Friday, up 10 points from Wednesday`s close of Rp8,530 per dollar.
The stronger Indonesia composite index (IHSG) on Friday was among others fueled by rupiah buy-ups, causing the local unit to strengthen against the US greenback, he said.
"The foreign capital inflows in the domestic investment market have caused the national currency to strengthen," he said.
He attributed the strong foreign capital inflows to positive domestic economic fundamentals and high yield investment.
"The negative US data have prompted foreign investors to switch to developing countries including Indonesia which offer high yield," he said.
In addition, he said market players still believed Bank Indonesia (the central bank/BI) would maintain its key rate at a level of 6.75 percent which they considered positive.
The lower-than-expected monthly inflation rate of 0.12 percent in May gave little boost to the rupiah`s strengthening, he said. "No inflationary pressure has been felt despite expectation of (higher) inflation in the months ahead. BI`s decision to keep the key rate at a level of 6.75 percent suggests that domestic economic fundamentals are positive," he said.(*)
S012/HAJM/H-YH
Editor: Jafar M Sidik
Copyright © ANTARA 2011
