Rupiah Rebounds From Three-Year Low as Central Bank Holds Rate

Indonesia’s rupiah climbed from a three-year low as the central bank refrained from reducing interest rates, maintaining the yield advantage on local assets. Government bonds were steady.

The currency reversed earlier losses to rise the most in a month as Bank Indonesia kept its reference rate at a record-low 5.75 percent for an eighth month. Bank of Korea cut borrowing costs today, following reductions this month in Australia and Brazil. Bank Indonesia held $110 billion in international reserves in September, the highest level since May, giving it scope to support the currency. Local 10-year bonds yield 5.90 percent, 4.21 percentage points more than U.S. Treasuries.

“The rupiah has room to rise as the reference rate remains stable in an environment of declining interest rates, which may make it more attractive to hold than dollars,” said Mika Martumpal, a currency analyst at PT Bank CIMB Niaga in Jakarta. “Bank Indonesia remains in the market to ensure the rupiah’s stability.”

The rupiah gained 0.6 percent to 9,583 per dollar as of 4:18 p.m. in Jakarta, prices from local banks compiled by Bloomberg show. It touched 9,657 earlier, the lowest level since October 2009. One-month implied volatility, which measures exchange-rate swings used to price options, held at 6 percent.

The central bank will guard the local currency from becoming too volatile, Deputy Governor Halim Alamsyah told reporters in Jakarta today.

The yield on the government’s 7 percent bonds maturing in May 2022 was little changed at 5.90 percent, the highest level since Oct. 1, prices from the Inter Dealer Market Association show.

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