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Indonesian Rupiah Gains on Central Bank Support; Bonds Advance

March 26 (Bloomberg) -- Indonesia’s rupiah rose for a second day on speculation the central bank will support the currency to help contain inflation.

The rupiah was also buoyed as a drop in crude oil costs tempered speculation consumer-price gains will quicken. Bank Indonesia will monitor and intervene in the currency and bond markets to curb volatility, the central bank said on its website this month. Government bonds advanced as foreign investors resumed buying debt before an auction tomorrow.

“The central bank wants to ensure rupiah stability,” said Robitirtanto Ekaperdana, a treasury dealer at PT BNI Securities in Jakarta. “The market is still concerned about the level of oil prices and the possible impact on inflation.”

The rupiah traded 0.14 percent stronger at 9,178 per dollar as of 3:50 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency lost 1.1 percent this month and touched 9,225 on March 23, the lowest since Jan. 12.

Crude oil prices dropped 0.6 percent to $106.25 a barrel today, after declining in each of the last two weeks. President Bambang Susilo Yudhoyono said on Feb. 22 that local energy prices need to be revised because of higher crude prices globally. The government raised its target for consumer-price increases this year to 7 percent from 5.3 percent, according to a document presented to parliament on March 7.

The yield on the government’s 7 percent bonds due May 2022 fell four basis points, or 0.04 percentage points, to 5.88 percent at midday trading, according to the Inter Dealer Market Association. The yield reached 6.02 percent on March 15, the highest since Jan. 17.

Foreign investors owned 225.5 trillion rupiah ($24.6 billion) of local-currency government bonds as of March 22, up from 224.7 trillion a week earlier, according to data published by the finance ministry on its website.

The government plans to auction 1 trillion rupiah of Islamic bonds tomorrow to conclude its offerings this quarter. It will offer Shariah-compliant notes maturing in 2018, 2022, 2027 and 2037, according to the debt management office.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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

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