Rupiah Weakens, Bonds Decline After Fed Refrains From Stimulus

Indonesia’s rupiah and government bonds declined for a second day after the Federal Reserve refrained from taking action to spur growth in the world’s largest economy, damping demand for emerging-market assets.

The Jakarta Composite Index (JCI) of shares dropped by the most since July 23 after the Federal Open Market Committee said the U.S. economy slowed in the first half and it would provide fresh stimulus if necessary. The European Central Bank will meet in Frankfurt today to discuss ways to tackle the region’s debt crisis, after President Mario Draghi said last week that he would do “whatever it takes” to preserve the euro.

“Markets are disappointed by the Fed meeting, causing declines in regional currencies,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at PT Bank Negara Indonesia. “The moves will be limited as investors wait for the outcome of the ECB meeting. Draghi pledged to do whatever it takes, but he has few feasible options.”

The rupiah weakened 0.1 percent to 9,478 per dollar as of 3:37 p.m. in Jakarta, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 7.5 percent.

The yield on the benchmark 7 percent bonds due May 2022 climbed one basis point, or 0.01 percentage point, to 5.72 percent, according to prices from the Inter Dealer Market Association.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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