• Indonesia's central bank left benchmark rate on hold Thursday
  • Local factors show positive tone for rupiah: deputy governor

The rupiah led gains in Asia as the Federal Reserve’s interest-rate increase and its signal for gradual tightening removed the uncertainty that’s spurred capital outflows.

Indonesia’s currency strengthened for a second day as the central bank refrained from adding to February’s rate cut, which could further undermine the rupiah just as the Fed raises. After the U.S. made its long-awaited move, global funds purchased $81 million more local shares than they sold on Thursday, the most since July, exchange data show. The Jakarta Composite Index of equities rose 1.9 percent this week, halting a run of losses.

“There is some certainty back in the market after the Fed increased its interest rate,” said Wiling Bolung, head of balance-sheet trading at PT Bank ANZ Indonesia in Jakarta. “The market didn’t see immediate outflows and sentiment is improving.”

The rupiah strengthened 0.7 percent to 13,915 a dollar in Jakarta, following a 0.5 percent advance on Thursday, according to prices from local banks. It gained 0.3 percent for the week. The currency has dropped 11 percent this year, trailing only the 19 percent loss in Malaysia’s ringgit among Asian exchange rates.

The Fed’s rate outlook will lessen pressure on global markets and the rupiah, with domestic factors pointing to a more positive tone for the local currency, central bank Deputy Governor Perry Warjiyo said in a Bloomberg TV interview on Friday.

The yield on Indonesia’s 10-year government bonds was little changed on Friday and fell two basis points this week to 8.70 percent, according to the Inter Dealer Market Association.

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