Rupiah Has Biggest Weekly Gain Since June on Improved Trade Data

Indonesia’s rupiah had the best week in three months as a narrowing trade deficit and the central bank’s decision to hold interest rates bolstered confidence in Southeast Asia’s largest economy.

Government bonds advanced for a second week, pushing the benchmark 10-year yield to a one-month low, after foreign funds added 2.1 trillion rupiah ($221 million) to holdings of sovereign notes in the first three days of this week, finance ministry data show. The trade shortfall shrank to $177 million in July from an all-time high of $1.3 billion in June, official data showed last week, while Bank Indonesia held its policy rate at a record-low 5.75 percent for a seventh month yesterday.

“Improving economic data and steady borrowing costs will give investors more confidence to buy into Indonesia,” said Artanavaro Gasali, the Jakarta-based head of global markets at PT Bank ICBC Indonesia. “Bonds saw a rally across all tenors, but it remains to be seen if these inflows are here to stay.”

The rupiah strengthened 0.7 percent this week to 9,522 per dollar as of 3:39 p.m. in Jakarta, the biggest weekly gain since the five days ended June 15, prices from local banks compiled by Bloomberg show. The currency advanced 0.7 percent today after reaching 9,609 yesterday, the weakest level since May 31.

One-month implied volatility, which measures exchange-rate swings used to price options, fell one percentage point this week to 5 percent. It dropped 85 basis points today.

The yield on the government’s 7 percent notes due May 2022 dropped eight basis points, or 0.08 percentage point, this week to 5.91 percent, prices from the Inter Dealer Market Association show. That was the lowest level since Aug. 15. The yield declined two basis points today.

Overseas investors bought $79 million more Indonesian stocks than they sold this week through yesterday, exchange data show. The nation’s economic growth and manageable inflation may attract fund inflows after the Federal Reserve announced a third round of asset purchases yesterday, central bank Governor Darmin Nasution said today.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE