Rupiah Snaps Two-Day Decline on Stimulus Speculation; Bonds Gain

Indonesia’s rupiah snapped a two-day drop and bonds gained on speculation further measures to stimulate the U.S. economy may increase demand for riskier assets. Ten-year yields fell to a four-month low.

Federal Reserve Chairman Ben S. Bernanke said policy makers are studying options for further easing in case economic growth remains too weak to produce a sustained decline in unemployment. Indonesia raised 9 trillion rupiah ($952 million) in a bond auction yesterday, exceeding its 6 trillion rupiah target, with investors bidding for 4.6 times the amount offered, the debt management office said.

“There is greater anticipation for stimulus from the Fed, driving funds to emerging-market currencies,” said Rully Nova, a currency analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “Pressure on the rupiah remains strong as export growth is still a concern. We expect Bank Indonesia to support it near current levels.”

The rupiah advanced 0.1 percent to 9,450 per dollar as of 4:05 p.m. in Jakarta, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 8 percent, the lowest level since May 15.

Moody’s Investors Service maintained the nation’s credit rating at the lowest investment-grade level, the agency said July 16. The yield on the government’s 7 percent bonds due May 2022 fell 12 basis points, or 0.12 percentage point, to 5.83 percent, the lowest since March 9, according to closing prices from the Inter Dealer Market Association.

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