Rupiah Halts Three-Week Losing Streak on Global Recovery Signs

Indonesia’s rupiah was little changed over the past five days, snapping a run of three weekly declines, as data from the U.S., China and Europe bolstered confidence in the global economic recovery. Bonds slipped on the week.

The currency sank to a four-month low earlier this week as concern Europe’s debt crisis will spread and a heightened risk of conflict on the Korean peninsula prompted investors to seek refuge in the dollar. Reports today may show Europe’s retail sales rebounded and U.S. payrolls gained. Figures in the last two days showed manufacturing picked up in China and the U.S. in November. The European Central Bank yesterday extended an emergency loan program to combat “acute” market tensions.

“We saw risk aversion rising in the early part of the week due to Europe and the Korean situation, which weighed on emerging currencies like the rupiah,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “But things were better by the second half of the week with the positive data from the U.S. and China. There was also anticipation that the ECB will do more for the euro zone.”

The rupiah traded at 9,012 per dollar as of 3:15 p.m. in Jakarta, from 9,013 yesterday and on Nov. 26, according to data compiled by Bloomberg. It reached 9,058 on Nov. 30 and Dec. 1, the weakest level since July 23. The currency will trade between 8,950 and 9,050 per dollar until year-end, Cahyadi said.

Retail sales in the 16-nation euro area rose 0.2 percent in October from September, when they slipped a revised 0.1 percent, according to the median estimate in a Bloomberg News survey before the data due today. U.S. employers added 150,000 workers last month after a 151,000 gain in October, a separate survey showed before a Labor Department report today.

Possible Ratings Upgrade

Moody’s Investors Service on Dec. 1 put Indonesia’s local-and foreign-currency debt ratings, currently at Ba2, on review for a possible upgrade, citing economic resilience and an improving debt position. It last upgraded the country to two levels below investment grade in September 2009.

“The Moody’s news is positive but didn’t do much to inject excitement into the market as Moody’s rating is a laggard compared to the other two agencies which are one level higher,” Cahyadi said.

Benchmark bonds fell for the fourth week on concern that rising inflation will pressure the central bank to lift benchmark rates.

The yield on the 11 percent note due November 2020 rose seven basis points this week to 7.64 percent from 7.57 on Nov. 26, according to mid-day prices from the Inter-Dealer Market Association. The rate was the highest in two weeks.

Inflation Concern

Consumer prices rose 6.33 percent in November from a year ago after gaining 5.67 percent in October, data on Dec. 1 showed. The median estimate in a Bloomberg survey was for a 5.98 percent rise. Inflation in 2010 may “slightly” exceed 6 percent this year and “inflationary pressure” may continue in 2011, Bank Indonesia Governor Darmin Nasution said that same day.

Indonesia’s benchmark policy rate will rise to 7.25 percent by the end of 2011, according to median estimates of economists surveyed by Bloomberg News.

Policy makers kept borrowing costs unchanged at 6.50 percent in their final rate-setting meeting of the year today. All 20 economists surveyed by Bloomberg News had expected the decision. The measure is at the lowest level since its introduction in July 2005.

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