Politics may affect rupiah

Bearish view: A man passes by a mock 1,000-rupiah coin on display at Bank Indonesia’s headquarters in Jakarta. Analysts expect the rupiah to drop 1.7 by end-June. – Reuters

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