A reappraisal of the rupiah is overdue

FOR decades, Indonesia’s currency has been vulnerable to shifts in global capital flows. The pain of the 1997 Asian financial crisis, with its ill-fated “I love rupiah” campaigns, lives long in the region’s collective memory.

With higher yields relative to most developed markets, the rupiah attracts global traders who are quick to sell whenever US dollar interest rates rise. This vulnerability, however, is easing as Indonesia’s economy improves.

Since the US began raising interest rates just over a year ago, the rupiah has suffered less than most of its emerging-market peers. It has been notably more resilient than the Indian rupee, which is down about 10 per cent against the greenback over the past 12 months.