Rupiah Forwards Rate See Biggest Leap on Inflation, Joko Widodo's Pledge

BY :YUDITH HO

FEBRUARY 03, 2015

Indonesia's rupiah forwards rose the most in more than six weeks after inflation slowed, the trade balance swung into surplus and President Joko Widodo pledged to end a dispute that could threaten his economic growth agenda.

Inflation eased to 6.96 percent in January, compared with 8.36 percent in December and the 7.46 percent median estimate in a Bloomberg survey, a report showed Monday. The country posted a $187 million trade excess for December, from a $426 million deficit the previous month.

Joko said on Monday that he will decide this week how to resolve a stand-off between the police and the KPK, the government's anti-corruption agency.

The rupiah's one-month non-deliverable forwards rose 0.9 percent, the most since Dec. 19, to 12,690 a dollar, data compiled by Bloomberg show. The spot rate advanced 0.5 percent to 12,625, prices from local banks show.

"People are concerned about Joko's public perception so an imminent conclusion to the dispute would be appreciated," said Gundy Cahyadi, an economist at DBS in Singapore. "What the market is watching for is the effectiveness of the government in pushing through with reforms to achieve its growth target."

The dispute between the police and the KPK arose after Joko's nomination for police chief, Budi Gunawan, was named a suspect in a corruption investigation by the anti-graft body. The police subsequently arrested a senior KPK official and started an investigation into the agency's chairman. Jokowi has so far declined to publicly take sides.

Southeast Asia's largest economy expanded 4.9 percent last quarter, the least since the three months through September 2009, Bloomberg data show. Joko is targeting 5.7 percent expansion this year and as much as 7 percent by 2017.

"The 7 percent growth target isn't impossible but it's ambitious," said Cahyadi. "Infrastructure development will help the economy but the secondary impact will only be felt in two to three years."

Bloomberg

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