Rupiah Gains Most in Two Weeks After Debt Auction Oversubscribed

Indonesia’s rupiah advanced by the most in more than two weeks and bonds gained after orders at a government debt auction yesterday exceeded the amount on offer.

The finance ministry raised 7.6 trillion rupiah ($786 million) from the local-currency sovereign sale, compared with the 7 trillion rupiah target, according to a statement on its website. Investors bid for 2.6 times the offered amount. Global funds added 6.3 trillion rupiah to their holdings of the securities this month through Feb. 22, the most since November, taking total ownership to a record 279.5 trillion rupiah, finance ministry data show.

“The potential for the rupiah to strengthen is still there,” said Nurul Eti Nurbaeti, Jakarta-based head of treasury research at PT Bank Negara Indonesia. “There’s positive sentiment as the bond auction was oversubscribed, which shows strong demand for local assets.”

The rupiah climbed 0.2 percent to 9,684 per dollar as of 3:11 p.m. in Jakarta, the biggest gain since Feb. 11, prices from local banks compiled by Bloomberg show. It has appreciated 0.6 percent this month, the best performance in Asia.

The currency traded at a 0.04 percent premium to one-month non-deliverable forwards, which rose 0.4 percent to 9,688. A daily fixing used to settle the derivatives was set at 9,687 today, compared with 9,705 yesterday, by the Association of Banks in Singapore.

One-month implied volatility in the rupiah, which measures expected moves in the exchange rate used to price options, held at 6.40 percent, the lowest level since Jan. 31.

The yield on the government’s 11 percent bonds due October 2014 dropped one basis point, or 0.01 percentage point, to 4.33 percent, according to prices from the Inter Dealer Market Association. At the previous government debt auction on Feb. 14, investors bid for 4.2 times the 7 trillion rupiah on offer, compared with 2.4 times at a Jan. 29 sale for the same amount.

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