A Currency Forex Traders Might be Ignoring

East Asia has been a hotbed for economic growth in the last few decades. Investors have been lured by prospects of investing in Korea, China, and India. Certainly, the economic growth in these countries has been remarkable, and potentially profitable. However, there may be one country the investment community is ignoring: Indonesia. On Wednesday, the World Economic Forum Report on Global Competitiveness was released. As reported by The Jakarta Globe, the report was extremely favorable for Indonesia's economy. Among G20 countries, Indonesia saw the largest improvement in its ranking, shooting up 10 spots in the past six years. The report compared Indonesia to the BRICS, and praised Indonesia's "macroeconomic environment". In a world where it seems like Moody's is constantly downgrading yet another country, investors might take solace in the fact that Indonesia has actually seen its credit rating upgraded as the nation has worked to reduce its debt burden. On Thursday, Indonesia's central bank decided to keep its interest rate unchanged—which did not surprise economists, according to Bloomberg—as inflation remained subdued. Indonesia's central bank currently has the benchmark interest rate set at 6.75%, which is obviously significantly higher than the interest rates of many developed nations, particularly in the U.S. where interest rates hover near 0%. It should be no mystery as to why the rupiah has been steadily gaining against the U.S. dollar. Action Items Bullish: Traders who believe that Indonesia remains a growth story might want to consider taking positions in the following:

• Market Vectors Indonesia Index IDX is a long play on the broader Indonesian economy. IDX may rally if the Indonesia economy collectively improves. It has rallied nearly 30% in the past year.
• Barclays GEMS Asia 8 ETN AYT is a play on the Indonesian currency. ATN is not a pure play, having exposure to seven other Asian currencies, but should offer investors some exposure.

Bearish: Traders who believe that Indonesia is due for a pullback may consider the following trades:

• Short MSCI Indonesia Investable Marked Index Fund EIDO. EIDO is an Indonesian ETF that might decline if the Indonesian economy enters a rough patch.
• Buy PowerShares DB US Dollar Bullish Index UUP. If Indonesia struggles, the rest of the emerging market may also be struggling. In that instance, investors may flee to the safety of the U.S. dollar and UUP might do well.

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