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Rupiah Snaps Two-Day Advance After Central Bank Maintains Rate

Indonesia’s rupiah declined, halting a two-day gain, after the central bank held borrowing costs unchanged even amid the fastest inflation in 22 months. Government bonds rose.

Bank Indonesia maintained the benchmark interest rate at a record low 5.75 percent today, as predicted by all 16 economists surveyed by Bloomberg. Policy makers kept the rate on its deposit facility, or Fasbi, at 4 percent. DBS Group Holdings Ltd., Societe Generale SA and Bank of America Merrill Lynch all said this month that they expected the latter would be increased in the coming months. Consumer prices rose 5.90 percent in March, the most since May 2011, official data showed on April 1.

“The market is disappointed to see rates unchanged,” said Fahrudin Haris Prastowo, a foreign-exchange trader at PT Bank Rakyat Indonesia. “There were expectations the deposit-facility rate would be raised as the central bank’s first measure in tackling inflation.”

The rupiah declined 0.2 percent to 9,705 per dollar as of 4:03 p.m. in Jakarta, prices from local banks compiled by Bloomberg show. It rose as much as 0.2 percent earlier to a six-week high of 9,670. The currency traded at a 0.1 percent premium to one-month non-deliverable forwards, which weakened 0.3 percent to 9,727, according to data compiled by Bloomberg.

Capital Inflows

A daily fixing used to settle the derivatives was set at 9,688 by the Association of Banks in Singapore, compared with 9,694 yesterday. One-month implied volatility for the rupiah, a measure of expected moves in the exchange rate used to price options, rose five basis points to 5.99 percent.

The country should benefit from an increase in capital flows into Asia, analysts at DBS Group led by Philip Wee in Singapore wrote in a research note today.

The yield on the 11 percent bonds due October 2014 dropped 10 basis points, or 0.10 percentage point, to 4.51 percent, the lowest level since April 5, according to prices from the Inter Dealer Market Association.

The cost to insure the nation’s government debt using five-year credit-default swaps fell five basis points to 146 basis points in New York yesterday, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

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