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.
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.