Rupiah Gains With Bonds on Government Steps to Spur the Economy

  • Central bank says foreign debt inflows driving currency
  • OCBC sees economic growth picking up to 5.1 percent in 2016

Indonesia’s rupiah and bonds gained in a shortened trading week after the government pledged to take measures to spur growth.

The currency has climbed 2 percent in three days to close at 13,644 a dollar in Jakarta before local markets shut on Dec. 24 and 25 for public holidays, prices from local banks compiled by Bloomberg show. The two-year debt yield fell eight basis points from Dec. 18 to 8.54 percent, according to the Inter Dealer Market Association.

The currency rose to a one-month high on Tuesday and is leading gains in Southeast Asia this month. Foreign inflows to the nation’s bonds have supported the rupiah’s strength and consumer-price inflation will dip to 2.8 percent in December, central bank Director Nanang Hendarsah said on Tuesday. Indonesia will allow private companies to build oil refineries, Coordinating Minister for Economic Affairs Darmin Nasution said on Monday, expanding the sector beyond state-owned enterprises.

“Investors are looking closer into coming back to Indonesian assets as there are enough positive domestic reasons to do so,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore. “The big question is, can the global market stay calm enough for emerging markets to benefit?”

Inflation may ease further as the government plans to cut regulated fuel prices in January, I Gusti Nyoman Wiratmaja Puja, director general of oil and gas at the Energy and Mineral Resources Ministry, was cited as saying on Tuesday by Investor Daily Indonesia. Prices rose 4.89 percent in November from a year earlier, the slowest pace since October 2014.

The central bank estimates the economy will expand 4.8 percent in the fourth quarter from a year earlier, compared with 4.73 percent in the previous three months. That’s below the full-year target of 5 percent to 5.2 percent in the revised state budget.

OCBC expects growth of 4.8 percent this year and 5.1 percent in 2016, Wiranto said.

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