Rupiah Is Near One-Week High as Bernanke Signals Further Easing

Indonesia’s rupiah was little changed near the strongest level in a week after Federal Reserve Chairman Ben S. Bernanke said the U.S. was unlikely to return to a recession, bolstering the outlook for global trade.

Bernanke also signaled on Dec. 5 that the central bank may be willing to increase the size of its bond repurchase program from the $600 billion announced last month, which may weaken the U.S. currency. Indonesia’s benchmark stock index rose for a fourth day after Belgian Finance Minister Didier Reynders said on Dec. 4 that the European Union could raise its 750 billion euro ($1 trillion) bailout fund for countries in the region needing aid. Government bonds rose.

“Asian currencies are generally stronger due to improved sentiment on the European side and in the U.S. as well,” said Ho Woei Chen, a regional economist at United Overseas Bank Ltd. in Singapore. “Asian currencies were recently battered by the situation in Europe. The rupiah’s move is in line with the rest of the region though I don’t see it outperforming the others.”

The rupiah traded at 9,010 per dollar as of 4:20 p.m. in Jakarta, compared with 9,009 on Dec. 3, according to data compiled by Bloomberg. It earlier reached 8,980, the strongest level since Nov. 29.

The rupiah will likely trade between 8,950 and 9,020 this week, Ho said.

Benchmark bonds rose for a third day. The yield on the 11 percent note due November 2020 dropped seven basis points to 7.36 percent, according to prices from the Inter-Dealer Market Association.

Bank Indonesia will be “compelled to take action” by the end of the first quarter to deal with inflation and will make the first of four 25 basis-point interest-rate increases in the first week of April, according to a Deutsche Bank AG report written by economists including Michael Spencer.

The central bank last week left its reference rate unchanged at 6.5 percent for a 16th meeting even as inflation quickened to 6.33 percent in November. Indonesia’s policy rate will rise to 7.25 percent by the end of 2011, according to the median estimate of economists surveyed by Bloomberg News.

-- With assistance from Weiyi Lim in Taipei. Editors: Simon Harvey, Sandy Hendry

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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