The Indonesian rupiah may become Asia's best-performing currency in 2021

With rising commodity prices bolstering the country's trade surpluses, the Indonesian rupiah might be Asia's best-performing currency for the remainder of the year.

A global energy crisis is favouring the coal and palm oil exporter, which has roiled many of its counterparts who are net commodity importers.
Indonesia is expected to release September trade numbers on Friday (October 8), following a record US$4.74 billion (S$6.41 billion) surplus in August, the country's 16th consecutive month of surplus.

Even while Asian rivals dropped due to higher Treasury yields, the rupiah surged 1.3 percent in the third quarter.
Bank Indonesia has plenty of ammo to maintain the currency if US yields climb more in the coming months, according to the country's record foreign reserves.

Mr Divya Devesh, head of Asean and South-Asia FX research at Standard Chartered Bank in Singapore, said, "We continue to lean strongly on the rupiah and expect it to be one of the strongest performers throughout emerging market Asia on a total-returns basis in the fourth quarter."

He pointed out that Indonesia was in better shape than it had been before the 2013 taper tantrum, with a total current account trade surplus of US$13 billion in the last four quarters, compared to a US$12 billion deficit eight years ago.

The rupiah's ambition to stay at or near the top of Asia's leadership board this quarter, after topping it in the three months ending September, is under threat.
Despite all of the bullish momentum, the currency was unable to break through technical barrier around 14,200 against the US dollar last month, which could limit any advances.

The appeal of the rupiah's carry trade will be harmed by continued increases in Treasury rates, which have risen over 20 basis points since the end of last month.
Through October 5, foreign funds had sold the country's debt for 13 days in a row on a net basis.