Rupiah Rises a Fourth Week as Inflows Drive Record Stock Index

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The rupiah gained for a fourth week, the longest stretch in a year, helped by inflows into the nation’s stocks.

The Jakarta Composite Index of equities closed at a record high Wednesday and overseas investors bought a net $65 million of shares in the first four days of the week. Bond purchases so far this month total $18 million. Bank Indonesia issued a new rule this week requiring business transactions to be conducted in the rupiah because those done using foreign currencies tend to weigh on the exchange rate.

“We’ve seen inflows to stocks,” contributing to the rupiah’s gains, said David Sumual, chief economist at PT Bank Central Asia in Jakarta. “The rule won’t have a significant impact immediately but should help improve the current account later on.”

The rupiah advanced 0.7 percent this week to close at 12,918 a dollar, the biggest gain since Jan. 23, prices from local banks compiled by Bloomberg show. The currency fell 0.1 percent Friday and has risen 2.2 percent in the past four weeks.

The rupiah must be used for cash and electronic transactions, with offenses carrying a maximum sentence of one year in jail, Eko Yulianto, director of the money-management department, said Thursday. The rule excludes interbank transactions that comply with banking regulations and exemptions can be made with central bank approval, he said. The government passed a law in 2011 criminalizing the use of foreign currencies for domestic transactions on Indonesian soil.

Only 26.5 percent of Indonesian companies with new foreign-currency debt have currency-hedging facilities, which poses a risk to the economy, central bank Governor Agus Martowardojo said on Friday.

Government bonds rose. The yield on the 10-year notes dropped 13 basis points, or 0.13 percentage point, this week to 7.25 percent, according to the Inter Dealer Market Association. The yield fell two basis points Friday.

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