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Indonesian Rupiah Forwards Snap Two-Day Drop on Inflow Optimism

Indonesia’s rupiah forwards rose, snapping a two-day decline, as inflows into the nation’s assets continued after Japan’s monetary stimulus earlier this month.

Overseas investors have pumped 8.72 trillion rupiah ($897 million) into the country’s local-currency notes since April 3, the day before Japan’s central bank said it would buy 7.5 trillion yen ($75 billion) of debt per month, helping to push the yen to a four-year low. Global funds bought $74 million more Indonesian stocks than they sold yesterday, the most since March 1, exchange data show.

The currency’s twelve-month non-deliverable forwards rose 0.2 percent to 10,185 per dollar in Jakarta, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

“There is some money coming in, and also anticipation that the weaker yen will pump some inflows into Indonesia from Japan,” said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “Still, we are cautious on the rupiah as the government needs to do something to tackle the current-account deficit.”

Indonesia posted a shortfall in the broadest measure of trade of $24.2 billion in 2012, the biggest annual deficit since Bloomberg began compiling the data in 1989.

The rupiah was little changed at 9,723 per dollar, according to prices from local banks compiled by Bloomberg. One-month implied volatility, which measures exchange-rate swings used to price options, dropped 15 basis points, or 0.15 percentage point, to 5.75 percent.

The yield on the government’s 5.25 percent bonds due May 2018 fell one basis point to 4.95 percent, according to prices from the Inter Dealer Market Association. The yield has declined 21 basis points in five days.

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