Rupiah Drops for Second Day Ahead of Central Bank Rate Review

Indonesia’s rupiah fell for a second day after the central bank signaled the nation’s borrowing costs are headed lower.

Bank Indonesia sees room to cut its benchmark rate, Deputy Governor Hartadi Sarwono said today, without providing a timeframe. Nine of 16 analysts in a Bloomberg survey predicted that policy makers will hold the reference rate at 6.50 percent on Nov. 10, while seven expect a 25-basis point cut. The Bloomberg-JPMorgan Asia Dollar Index fell as Italy’s Prime Minister Silvio Berlusconi faces a confidence vote amid a surge in borrowing costs, spurring concern that Europe’s debt crisis is spreading.

“Internally, the economy of Indonesia is still good,” said Rully Nova, a foreign-exchange analyst at PT Bank Himpunan Saudara in Jakarta. “The rupiah is still influenced by the external developments, by the debt crisis in Europe.”

The rupiah dropped 0.1 percent to 8,960 per dollar as of 9:30 a.m. in Jakarta, according to data compiled by Bloomberg. The currency has fallen 1.2 percent this month.

The economy may expand 6.5 percent this year and inflation may reach 4.2 percent in 2011, Sarwono said. Gross domestic product rose 6.54 percent in the three months through September from a year earlier, compared with a revised 6.52 percent in the second quarter, the Central Bureau of Statistics said yesterday.

Benchmark 10-year government bonds rose, with the yield slipping one basis point, or 0.01 percentage point, to 6.22 percent, according to data compiled by Bloomberg. The rate fell to a record low of 6.211 percent on Nov. 4.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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

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