Rupiah Forwards Advance Most in Week After Funds Purchase Assets

Indonesia’s rupiah forwards advanced by the most in almost a week on speculation foreign funds will boost investments in local assets as consumption drives the nation’s economic growth amid a global slowdown.

Government debt holdings were poised for a third straight week of inflows, with overseas investors adding 4.27 trillion rupiah ($444 million) this month through Oct. 18, Finance Ministry data show. Global funds purchased $138 million more local stocks than they sold last week, exchange data show. The economy will grow 6.1 percent this year and 6.3 percent in 2013, the World Bank said last week. Bank Indonesia maintained its benchmark interest rate at a record-low 5.75 percent for an eight month in October, the central bank said Oct. 11.

“Indonesia’s economy is attractive as growth is still strong and is domestically driven,” said Klara Pramesti, a research analyst in the treasury division at PT Bank Negara Indonesia in Jakarta. “As long as the political and economic situation remains stable, 10-year bond yields can dip lower than even the reference rate.”

Twelve-month non-deliverable forwards strengthened 0.1 percent to 10,122 per dollar as of 3:55 p.m. in Jakarta, the biggest gain since Oct. 16, according to data compiled by Bloomberg. The contracts to buy or sell the rupiah in one year traded at a 5.2 percent discount to the spot rate. Non- deliverable forwards are settled in dollars.

The rupiah declined 0.1 percent to 9,600 per dollar, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 6.25 percent.

The yield on the government’s 7 percent bonds maturing in May 2022 was little changed at 5.76 percent, near a 10-week low reached on Oct. 18, 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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