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Indonesian Rupiah, Bonds Advance After Moody’s Ratings Upgrade

Indonesia’s rupiah climbed to a two- month high and bonds advanced on optimism this week’s credit- rating upgrade by Moody’s Investors Service will boost demand for the nation’s assets.

Moody’s raised the country’s foreign- and local-currency ranking by one level to Baa3 yesterday, its lowest investment grade, prompting central bank Deputy Governor Hartadi Sarwono to say that Indonesia may become a “safe haven” for global investors. International funds bought $66 million more local shares than they sold yesterday, according to exchange data.

“The stamp of approval by Moody’s shows Indonesia’s economic fundamentals are in place,” said Radhika Rao, an economist at Forecast Pte in Singapore. “The move is positive for bonds and the currency as it opens up the country to overseas funds.”

The rupiah rose 1.1 percent to 8,973 per dollar as of 4 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. That was the strongest level since Nov. 15.

Indonesia’s credit fundamentals are evolving in a positive direction, Agost Benard, S&P’s associate director in Singapore said today. Fitch Ratings raised the nation back to investment grade last month after 14 years of junk ratings, citing “strong and resilient growth.”

Government bonds gained the most in seven weeks. The yield on the benchmark 7 percent bonds due May 2022 fell 29 basis points, or 0.29 percentage point, to 5.68 percent today, according to the Inter-Dealer Market Association. That was the biggest drop in rate since Dec. 2.

Bank Indonesia will buy more longer-term government bonds as yields on short- and mid-term maturities have stabilized, Governor Darmin Nasution said in Jakarta yesterday.

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

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

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