Asia's carry-trade darling haunted by politics as Fed hikes loom

KUALA LUMPUR (March 30): Indonesia’s rupiah could reverse gains that made it emerging Asia’s top performer in 2016 as some of the currency’s key supports risk turning into Achilles heels.

President Joko Widodo’s economic reforms have underpinned the rupiah’s climb, as have the highest Asian bond yields after Pakistan, which make its debt a favorite among foreign investors. This year, politics could become a drag, with the Widodo-backed governor of Jakarta under fire from Islamic groups ahead of next month’s city election run-off, while US tightening risks reducing that much-loved yield advantage. And then there’s Donald Trump.

Up 1.2% to 13,314 per dollar this year, the rupiah could slump 1.8% by the end of the first half, the median of analysts’ estimates compiled by Bloomberg shows.

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