Rupiah Halts Three-Day Loss on Stimulus Speculation; Bonds Gain

Indonesia’s rupiah halted a three- day decline and bonds gained on speculation the Federal Reserve will take more measures to support the U.S. economy, spurring fund flows into emerging markets.

Global funds bought $34 million more Indonesian equities than they sold yesterday, the biggest purchases in two weeks, according to exchange data. The MSCI Asia-Pacific Index (MXAP) of regional shares advanced the most in almost three weeks after Fed Chairman Ben S. Bernanke said yesterday the central bank is ready to take further action to boost the recovery if necessary.

“Bernanke signaled that the option of adding stimulus is open, which creates positive global sentiment and drives the rupiah higher,” said Klara Pramesti, a Jakarta-based research analyst in the treasury division at PT Bank Negara Indonesia. “The rupiah will tend to be stable at 9,450 to 9,500.”

The currency strengthened 0.4 percent to 9,448 per dollar as of 4:03 p.m. in Jakarta, the biggest gain in a week, according to prices from local banks compiled by Bloomberg. One- month implied volatility, which measures exchange-rate swings used to price options, held at 8 percent.

The yield on the government’s 7 percent bonds due May 2022 fell five basis points, or 0.05 percentage point, to 5.78 percent, the lowest level since March 6, according to closing prices from the Inter Dealer Market Association.

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

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