Rupiah Declines as Foreign Funds Reduce Holdings on U.S., Europe

Indonesia’s rupiah reached an eight- week low after foreign funds cut holdings of local assets as Europe’s debt crisis and the U.S.’s failure to agree on deficit- cutting measures damped demand for emerging-market assets.

The currency dropped for a sixth day after offshore ownership of Indonesian government debt fell 1.1 percent to 219.71 trillion rupiah ($24.1 billion) last week, according to finance ministry data. Overseas investors sold $60 million more Indonesian shares than they bought yesterday as the benchmark stock index slipped 2 percent, exchange data show. The central bank said last month it will sell the dollar when needed to ease currency volatility.

“It is still the negative sentiment coming from the U.S. and Europe,” said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. “People are closely watching the stocks and capital inflows. Bank Indonesia is in the market to ease volatility rather than defend a specific level.”

The rupiah declined 0.6 percent to 9,105 per dollar as of 9:49 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It touched 9,115, the weakest level since Sept. 26. The currency has dropped 2.8 percent this month.

The yield on the government’s benchmark 8.25 percent bonds due July 2021 increased 12 basis points, or 0.12 percentage point, last week to 6.35 percent, according to prices from the Inter-Dealer Market Association. It was little changed yesterday.

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

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

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