The Indonesian rupiah rose to its highest against the dollar in more than 3-1/2 years on Thursday, with market players expecting more gains on growing confidence that the central bank would succeed in containing inflation. Traders said the dollar dipped below support at its November low near 8,880 rupiah and fell as low as 8,875, the dollar's lowest level since June 2007.
"We think the Indonesian story is pretty strong after the BI (Bank Indonesia) raised interest rates and also said that they are now favouring a stronger currency. So that was really the key game-changer," said Thomas Harr, head of Asian FX strategy for Standard Chartered in Singapore.
The rupiah's gains on Thursday were tempered by dollar-buying intervention by Indonesia's central bank, which was seen likely to continue to cushion the dollar's decline. The next next downside target for the dollar was likely to be 8,850 with firmer support coming in at 8,800, the trader added. Indonesia's central bank surprised many market players by raising its benchmark interest rate by 25 basis points to 6.75 percent earlier this month after inflation hit a 21-month high of 7 percent in January, and economists expect another 75 basis points of hikes this year.
The dollar edged lower against the Thai baht. The US dollar dipped against the Singapore dollar despite lower than expected Singapore gross domestic product (GDP) data. Singapore said that fourth quarter GDP growth was lower than earlier estimates due to weakness in its manufacturing sector.
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