(Bloomberg) -- Rupiah bulls are betting on further gains as foreign investors pile into Indonesian debt ahead of key interest-rate moves.

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Strategists at Malayan Banking Bhd and CIMB Bank Bhd see the currency strengthening toward 15,000 per dollar by year-end. That’s a sharp reversal from their previous forecasts of a weaker rupiah, which closed at 15,400 per dollar Friday.

The optimism signals an enduring rally for the rupiah — one of Asia’s best-performing currencies this quarter. A widely expected pivot from the Federal Reserve is luring foreign capital into Indonesian bonds, where the central bank will likely leave borrowing costs steady on Wednesday, keeping their yield gap wide.

CIMB raised its forecast “to incorporate more dovish and front-loaded expectations for the Fed,” said Michelle Chia, regional head of treasury markets and research in Kuala Lumpur. The rupiah’s “positive carry and favorable rotation of portfolio flows, further declines in onshore foreign currency deposits, as well as abating terms-of-trade headwinds” add to its strength, she said.

Foreign investors have piled $2.9 billion into Indonesian bonds since July, on track for the biggest net quarterly inflow since March 2023. Exporters are also expected to gradually convert their dollar holdings into local currency as the greenback weakens. Foreign currency holdings at banks in Indonesia are near a record, according to data compiled by Bloomberg.

The changing backdrop fueled the rupiah’s turnaround from one of the worst performers in Asia in the first half of 2024. Seasonal dividend repatriation flows, a stronger greenback from a hawkish Fed and investors shunning Indonesian debt amid concerns of a government spending plan weighed on the currency.

The headwinds may reemerge should the nation’s trade surplus deteriorate amid weaker commodity prices and lingering concerns over the fiscal outlook from the incoming government. A slower-than-expected easing from the Fed may also support the greenback, weighing on emerging-market assets.

The median forecast of strategists is for the rupiah to trade at 15,600 by the year-end, according to data compiled by Bloomberg.

The rupiah should perform “more strongly as flows would strengthen even further once the Fed easing cycle becomes more entrenched and clear,” said Alan Lau, a currency strategist at Maybank, who sees the rupiah at 14,900 by year-end.