T

he rupiah may continue to strengthen in the second half of this year as exports look likely to improve due to a global rise in demand, following the possibility of worldwide economic recovery, the central bank says.

"If exports improve, we'll receive more foreign currencies, thus strengthening the rupiah," Bank Indonesia Deputy Governor Hartadi A. Sarwono said Monday.

"The global economy plays an important role ... Indonesia has good macroeconomic policies, and those attract investment."

The rupiah appreciated 0.3 percent to 9,970 per dollar as of 5:20 pm Monday in Jakarta, according to data compiled by Bloomberg, after touching 9,945, its strongest level since June 8.

The rupiah has rallied 9.3 percent this year, and is the best-performing of the 10 most active currencies in Asia outside Japan.

Trade Minister Mari Elka Pangestu said exports by value would improve from previous estimates earlier this year.

Exports may contract by between 15 percent and 20 percent this year, from the earlier estimate of a contraction of between 20 percent and 30 percent.

"It looks like Asia is the quickest *region* to recover from the global *financial* crisis," she said.

Asia is technically decoupled from the G3 - the United States, the EU and Japan - even more in the second quarter this year, with Singapore and China having the strongest momentum, Citi analyst Johanna Chua said in a statement.

"We expect Asian countries that posted steep quarterly contractions in this cycle to get back to pre-recession peaks in nine quarters, on average," she said.

Hartadi said, "Singapore has a strong trade position in the world. If Singapore improves, we'll improve."

The latest data from the Central Statistics Agency (BPS) shows Singapore is Indonesia's third-biggest export market, buying up US$2.46 billion in non-oil-and-gas products between January and April this year.

Total exports of non-oil-and-gas products reached $26.9 billion in the first four months of this year, down from $34.79 billion in the same period in 2008.

Mari said exports fell about 20 percent in the first half of this year. No official figure has been released.

"For 2010, we predict *exports may grow by* about 5 percent," she said, based on this year's estimates.

Hartadi warned against the rupiah strengthening "too fast" or beyond the economic fundamentals, pointing out this would affect exports.

"Therefore we need to strengthen the rupiah, but not let it gain too fast or beyond our economic fundamentals," he said.

The rupiah is expected to hover at an average 10,500 per dollar this year, according to a working committee comprising officials from the government and the House of Representatives.

The economy is expected to expand by 4.3 percent this year.

The latest data from the BPS shows the economy expanded by 4.4 percent in the first quarter of this year.