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Rupiah Strengthens on Intervention Speculation; Bonds Decline

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March 7 (Bloomberg) -- Indonesia’s rupiah gained by the most in almost a week, reversing an earlier loss, on speculation the central bank intervened and domestic demand for the dollar eased. Bonds declined.

Bank Indonesia has been intervening in the currency and bond markets to curb volatility, Governor Darmin Nasution said last month. The currency fell earlier on speculation slowing growth in Europe and China was deterring risk-taking. Bank Indonesia will keep its benchmark interest rate unchanged at 5.75 percent tomorrow, according to 15 out of 16 economists surveyed by Bloomberg. One expects a 25-basis point cut.

“The central bank is always present in the market,” said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. “There was high demand for the dollar this morning but it eased as the day went on.”

The rupiah gained 0.6 percent to 9,110 per dollar as of 4:59 p.m. in Jakarta after weakening as much as 0.4 percent earlier, according to prices from local banks compiled by Bloomberg.

Foreign funds have reduced holdings of Indonesian government bonds by more than 4 percent to 226.33 trillion rupiah ($24.8 billion) since the end of January, according to data compiled by Bloomberg.

The yield on the government’s 7 percent bonds due May 2022 climbed 12 basis points, or 0.12 percentage point, to 5.84 percent, the highest since Jan. 18, according to closing prices from the Inter Dealer Market Association.

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

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

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