Rupiah Advances to Three-Month High as Stocks Rally on Inflows

Indonesia’s rupiah rose to a three-month high and local stocks advanced as global investors bought the nation’s assets after its current-account deficit narrowed.

The currency climbed 0.3 percent to 11,785 per dollar as of 4:11 p.m. in Jakarta, after reaching 11,658 earlier, the strongest level since Nov. 20, prices from local banks show. The yield on government bonds due March 2024 fell 15 basis points to 8.47 percent, the lowest level since Jan. 20, prices from the Inter Dealer Market Association show. The Jakarta Composite (JCI) index of local shares closed at the highest level since October.

Overseas funds added 3.37 trillion rupiah ($286 million) to holdings of local-currency sovereign debt this month through Feb. 11, and bought a net $186 million of Indonesian stocks in February through last week. The current-account shortfall shrank to 1.98 percent of gross domestic product last quarter from 3.85 percent in the previous three months, according to figures published Feb. 14. That was within the 0.25 percent to 2.5 percent range seen as sustainable by Bank Indonesia.

“The current-account deficit improved very significantly, which boosts the outlook for the rupiah and restores investor confidence,” said Dini Agmivia Anggraeni, a fixed-income analyst at PT Maybank Kim Eng Securities in Jakarta. “The 10-year yield has overshot our estimate at 8.5 percent and may be poised for a correction.”

Banks led gains in stocks today, with PT Bank Rakyat Indonesia rising 2.6 percent and PT Bank Central Asia (BBCA), the nation’s largest lender by market value, gaining 1 percent. PT Astra International, which has the largest weighting in the Jakarta index, advanced 1.9 percent.

Stock Inflows

The benchmark share gauge rose 6.6 percent so far this year as foreign investors bought net $383.2 million of local stocks this year, the only net inflow among eight Asian equity markets monitored by Bloomberg.

In the offshore market, rupiah one-month non-deliverable forwards fell 0.4 percent to 11,685 per dollar, trading 0.8 percent stronger than the onshore spot rate, data compiled by Bloomberg show. A fixing used to settle the contracts was set at 11,605 per dollar today by the Association of Banks in Singapore, from 11,780 on Feb. 14.

One-month implied volatility, a measure of expected moves in the rupiah used to price options, climbed 26 basis points, or 0.26 percentage point, to 11.21 percent, according to data compiled by Bloomberg.

To contact the reporters on this story: Yudith Ho in Jakarta at yho35@bloomberg.net; Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

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

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