Bali Ha'i Calling
By: Brazil has gotten plenty of attention lately, with its high-yielding government bonds and a rapidly growing economy. But with so many investors focused on one country, it is getting harder to trade the currency profitably.
Enter the Indonesian rupiah.
Rebecca Patterson, global head of foreign exchange and commodities for JP Morgan's private bank and a contributor to Money in Motion, calls Indonesia a "baby Brazil," with economic growth likely to reach 7% next year and policy interest rates likely to rise from around 6.75%. Indonesia has a current account surplus and extensive trade ties with China, so it rides the coattails of that country's growth. And trading out of dollars into rupiah provides a positive carry from Indonesia's higher interest rates.
Rebecca told me she expects the dollar/rupiah rate to move to around 8600 this year, from around 8935 now. Not too shabby.
Of course - of course! - there's a hitch. Only companies active in Indonesia can trade on the local spot FX market. Mere mortals can buy non-deliverable forward contracts - or, more simply, look for bonds denominated in rupiah that are issued by a World Bank subsidiary. Happy hunting.
CURRENCY FUTURES:
Tune In: Beginning March 11th, CNBC's "Money in Motion Currency Trading" will air on Fridays at 5:30pm.
"Money in Motion Currency Trading" will repeat on Saturdays at 7pm.
