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Rupiah Forwards Climb Most in Seven Weeks on Fed Stimulus Signs

Indonesia’s rupiah forwards gained the most in seven weeks on signs the Federal Reserve will act to support the world’s largest economy, spurring demand for emerging-market assets. Government bonds declined.

Contracts to buy the Indonesian currency in twelve months touched a one-week high after many policy makers at the Fed said additional stimulus will likely be needed “fairly soon” unless the U.S. economy shows signs of a sustained recovery, according to minutes of the July 31-Aug. 1 meeting released in Washington yesterday. Foreign funds bought $78 million more local stocks than they sold this week through yesterday, exchange data show.

“Stimulus seems more certain now,” said Artanavaro Gasali, the Jakarta-based head of global markets at PT Bank ICBC Indonesia. “The rupiah may remain weak until September, when it usually begins strengthening as foreign investors buy for the next year.”

Twelve-month non-deliverable forwards climbed 0.7 percent to 10,019 per dollar as of 4:16 p.m. in Jakarta, the biggest advance since July 2, data compiled by Bloomberg show. The contracts touched 10,014, the strongest level since Aug. 15. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

The rupiah rose 0.2 percent to 9,494 per dollar, according to prices from local banks compiled by Bloomberg. One-month implied volatility, which measures exchange-rate swings used to price options, fell 20 basis points to 6.80 percent.

The yield on the government’s 7 percent bonds due May 2022 rose two basis points, or 0.02 percentage point, to 5.97 percent, according to closing 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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