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Rupiah Advances After Funds Boost Stock Holdings; Bonds Rise

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Jan. 26 (Bloomberg) -- Indonesia’s rupiah approached the strongest level in almost three months after global funds raised holdings of local assets to benefit from the nation’s higher yields. Government bonds rose.

Overseas investors bought $414 million more Indonesian shares than they sold this month through yesterday and were net purchasers of bonds worth $338 million, according to exchange and finance ministry data. The Dollar Index, a gauge of the greenback’s value against six major currencies, fell 0.5 percent yesterday as the U.S. Federal Reserve signaled that it will keep interest rates low until late 2014.

“The Fed’s decision has boosted risk appetite,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “The dollar is weak. The rupiah is following the global trend.”

The rupiah appreciated 0.7 percent to 8,970 per dollar as of 3:25 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It reached 8,895 earlier and touched 8,875 yesterday, the strongest level since Nov. 1.

The yield on the government’s 7 percent bonds due May 2022 fell five basis points, or 0.05 percentage point, to 5.59 percent, according to midday prices from the Inter-Dealer Market Association. The difference in yields between the nation’s notes due in a decade and similar-maturity U.S. Treasuries was 362 basis points.

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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