The rupiah's recent rise has set in motion a virtuous circle of falling inflation and lower interest rates, fuelling tentative economic growth and cutting the debt burden of Indonesia's beleaguered companies. But not everybody is celebrating.

"The weaker the rupiah, the better for us," said the chief financial officer at a major Indonesian textile firm which exports almost all of its output.

"When the rupiah was weak last year we made bumper profits. The rupiah content of our products became very cheap in dollar terms and we had plentiful cash flow. When the rupiah gets stronger, automatically our margins are eroded."

The rupiah hit its highest levels since February 1998 on Tuesday, firming to around 6,900 to the dollar on mounting confidence after Indonesia's firstdemocratic elections in more than four decades passed smoothly with remarkably little unrest.

But its rapid advance has sparked concerns that currency strength could throttle a crucial driver of recovery -- exports.

Analysts say the risk is there -- but only if the rupiah gallops on unchecked and breaks through 6,000 to the dollar.

"Exporters have started to complain that the strength of the rupiah is hurting them. I think if the rupiah is below 6,000 then it's going to be fairly serious for exporters," said David Chang, head of research at Jakarta's Trimegah Securities.

Many exporters booked heavy windfall profits last year as the rupiah sank as low as 17,000 to the dollar. As the currency advances, they are finding it harder to compete.

"Most Indonesian products have very little value added so they have to compete on price," said the head of treasury at a foreign bank in Jakarta. "So the stronger rupiah is hurting."

Chief economics Minister Ginandjar Kartasasmita, rattled by the rapid rise, saidlast week the rupiah was gaining too fast.

But most analysts say at current levels the rupiah remains undervalued, giving Indonesian exporters an advantage.

"The fair value of the rupiah is around 6,000 so it is still undervalued," said Neil Saker, regional economist at SG Securities in Singapore.

The textile firm CFO said although margins were shrinking, Indonesian exports still had a competitive edge.

"Because the devaluation of the rupiah is so much more than other regional currencies, even if the rupiah was to stay at this level we are still generally much more competitive," he said.

Moreover, analysts say, concerns about the competitiveness of Indonesia's exports are missing the point.

Exports failed to benefit from the rupiah's collapse last year. Although Indonesia's trade surplus ballooned, this was due to a plunge in imports. Exports remained stagnant, with companies paralysed by a lack of working capital and trade finance.

"When the rupiah weakened they were not able to benefit,because a lot of them had financing problems and a lot of buyers considered them unreliable suppliers," Chang said.

For exporters, breaking free from this paralysis is crucial.

"The reason why exports did not do well in Indonesia given the massive exchange rate weakness was that banks weren't supplying working capital to exporters, so that meant they couldn't really produce," Saker said.

"But as banks are slowly recapitalised, more money should go to the exporters and that will more than compensate for the problem on the exchange rate side."