Rupiah, Bonds Advance as U.S. Data Offsets Fuel Subsidy Concern

Indonesia’s rupiah climbed the most in five months and bonds gained as signs of an improving U.S. economy outweighed concern on government plans to reduce fuel subsidies.

Pending sales of existing homes rose 2 percent last month, double the median forecast of 1 percent, according to the National Association of Realtors in Washington yesterday. Bank Indonesia had forecast on Feb. 20 the economy will grow 6.3 percent to 6.7 percent this year. Inflation may exceed the central bank’s target of a maximum of 5.5 percent in 2012 if fuel prices are raised by 1,000 ($0.11) per liter or more, Governor Darmin Nasution said on Feb. 23.

“The rupiah is more driven by the global economy as a whole at the moment,” said Gusti Kahari, a foreign exchange dealer at PT Bank Artha Graha Internasional in Jakarta. “Higher fuel prices will surely have an impact but it won’t be so severe because Indonesia has very strong fundamentals.”

The rupiah rose 0.3 percent to 9,137 per dollar as of 4:19 p.m. in Jakarta, the most since Feb. 17, according to prices from local banks compiled by Bloomberg. The currency touched 9,214 yesterday, the weakest level since Jan. 16.

The yield on the government’s 7 percent bonds due May 2022 fell seven basis points, or 0.07 percentage points, to 5.65 percent, according to midday prices from the Inter Dealer Market Association.

The energy ministry proposed increasing the price of subsidized diesel oil and low-octane gasoline by 1,500 rupiah per liter, or setting a maximum subsidy of 2,000 rupiah per liter regardless of crude price changes, Energy Minister Jero Wacik said today. Indonesia will decide whether to reduce fuel subsidies after the government’s discussion with parliament to revise the 2012 state budget in March, Hatta Rajasa, coordinating minister for the economy, said on Feb. 23.

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