Rupiah Gains to 19-Week High as Jokowi Candidacy Lures Inflows

Indonesia’s rupiah rose to a 19-week high after foreign funds pumped money into local stocks as Jakarta Governor Joko Widodo announced he would run in July’s presidential election.

Overseas investors added $656 million to holdings of Indonesian equities, the most since May, on March 14 as the Indonesian Democratic Party of Struggle (PDI-P) said Widodo, known locally as Jokowi, would be its candidate. That helped push the Jakarta Composite index up 3.2 percent and into bull-market territory. A Jokowi administration would probably boost spending on infrastructure and public welfare, according to a report last month from CIMB Group Holdings Bhd.

The rupiah strengthened 0.9 percent to 11,255 per dollar as of 9:59 a.m. in Jakarta, prices from local banks show. That is the highest level since Oct. 31. In the offshore market, one-month non-deliverable forwards advanced 0.5 percent to 11,285 per dollar, trading 0.2 percent weaker than the onshore rate, data compiled by Bloomberg show.

“Foreign funds are rushing in after the Jokowi news,” said Putra Perdana Akbar, a foreign-exchange dealer at PT Bank Rakyat Indonesia in Jakarta. “The rupiah strengthening too fast could weigh on exports, so that could become a concern, but strong inflows may continue to support the gains.”

Jokowi led in a January opinion poll by the Indonesian Survey Circle, attracting 35.6 percent of support, followed by 20.1 percent for Aburizal Bakrie of the Golkar party.

Bonds Rally

The JCI, which rose 0.4 percent today, has advanced more than 20 percent from an Aug. 27 low, the percentage of increase commonly defined as a bull market. PT CIMB Securities Indonesia, the nation’s second-largest brokerage, sees the JCI gaining a further 7 percent this year on the Jokowi nomination and possible presidency, analyst Erwan Teguh in Jakarta, said after the market closed on March 14.

A fixing used to settle forwards on the rupiah was set at 11,423 per dollar on March 14 by the Association of Banks in Singapore, while Bank Indonesia’s onshore rate was placed at 11,421. Today’s ABS reference will be released at 10:30 a.m. Jakarta time, while the central bank’s will be posted at 10 a.m.

One-month implied volatility, a measure of expected moves in the rupiah used to price options, dropped 31 basis points, or 0.31 percentage point, to 10.49 percent.

The yield on the government’s 8.375 percent bonds due March 2024 slid six basis points to 7.94 percent, the lowest level since Nov. 7, according to the Inter Dealer Market Association.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Robin Ganguly

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