Rupiah Rises to 6-Week High After Inflows Boost Stocks to Record

Indonesia’s rupiah climbed to a six-week high on signs capital inflows into local assets are increasing after the Federal Reserve unveiled a third round of debt purchases, a policy that boosts the supply of dollars.

The Jakarta Composite (JCI) Index of shares surged to a record on Sept. 14 as foreign investors bought $221 million more local stocks than they sold last week, exchange data show. Global funds added 3.43 trillion rupiah ($363 million) to government debt holdings last week through Sept. 13, government figures show. The Fed announced last week it will start buying $40 billion a month of mortgage debt to support the U.S. economy.

The rupiah strengthened 0.6 percent to 9,453 per dollar as of 9:15 a.m. in Jakarta, the strongest level since Aug. 7, prices from local banks compiled by Bloomberg show. The currency reached 9,609 on Sept. 13, the weakest level since May. One- month implied volatility, which measures exchange-rate swings used to price options, held at 5 percent.

“The rupiah can reach as high as 9,400 today as investors hunt for high-yielding currencies on renewed risk appetite,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at PT Bank Negara Indonesia. “This optimism will remain until the end of the month, lending support for the rupiah at 9,500.”

The yield on the government’s 7 percent notes due May 2022 dropped 13 basis points last week, or 0.13 percentage point, to 5.86 percent on Sept. 14, the lowest level since Aug. 10, prices from the Inter Dealer Market Association show.

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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