Rupiah Gains a Second Week as Funds Buy Assets; Bonds Advance

Indonesia’s rupiah headed for a second week of gains after global funds bought the nation’s assets on expectation central banks in the world’s largest economies would ease monetary policy. Government bonds rallied for a seventh straight week.

Overseas investors added 2.48 trillion rupiah ($264 million) to their government bond holdings in the first two days of this week, the most since the five days ended April 6, and purchased $165 million more local stocks than they sold this week through yesterday, finance ministry and exchange data show. The European Central Bank cut its reference rate to a record low yesterday and the People’s Bank of China reduced borrowing costs.

“We see greater confidence in the Indonesia markets,” said Rully Nova, a currency analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “Global stimulus measures would be positive for Indonesia and for the rupiah as it would increase liquidity in the market.”

The rupiah gained 0.3 percent this week to 9,405 per dollar as of 4:11 p.m. in Jakarta, poised for its biggest weekly gain since the five days ended June 15, according to prices from local banks compiled by Bloomberg. The currency touched 9,334 on July 4, the strongest level since June 7, and weakened 0.2 percent today.

One-month implied volatility, which measures exchange-rate swings used to price options, declined 25 basis points, or 0.25 percentage point, to 8.25 percent, the lowest level since May 15.

Bank Indonesia’s focus is now on keeping the rupiah stable, from countering slowing global growth since last year, Perry Warjiyo, director for economic and monetary-policy research, said today.

The government’s 7 percent bonds due May 2022 advanced, pushing the yield down 11 basis points this week, or 0.11 percentage point, to 6.05 percent, according to prices from the Inter Dealer Market Association. The yield reached 6.03 percent yesterday, the lowest level since May 3, and climbed one basis point today.

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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