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Rupiah Snaps 3-Day Drop After Global Funds Raise Bond Holdings

Indonesia’s rupiah gained, snapping a three-day drop, after global investors raised holdings of the nation’s bonds. Government notes declined.

International funds bought 1.6 trillion rupiah ($165 million) more sovereign notes than they sold last week, finance ministry data show. The MSCI Asia-Pacific Index of shares rose after European Union President Herman Van Rompuy submitted a 10- year road map to reshape the euro area through common banking supervision and deposit insurance ahead of a summit of the region’s leaders tomorrow.

“We have seen foreign investors return to Indonesia’s bonds,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at PT Bank Negara Indonesia. “The rupiah is still driven by sentiment, and investors are expecting results from the summit that can produce long-term solutions.”

The rupiah strengthened 0.2 percent to 9,489 per dollar as of 3:35 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency has lost 3.5 percent since the end of March, headed for its biggest quarterly decline since the first three months of 2009.

One-month implied volatility, which measures exchange-rate swings used to price options, slid two percentage points to 8.5 percent today. That was the biggest drop since Jan. 13.

The yield on the government’s 7 percent bonds due May 2022 climbed one basis point, or 0.01 percentage point, to 6.28 percent, according to prices from the Inter-Dealer Market Association. The yield rose 35 basis points this quarter and 25 basis points this year.

To contact the reporter on this story: Yudith Ho in Jakarta at yho35@bloomberg.net.

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

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