Rupiah Gains to 19-Week High as Jokowi Candidacy Lures Inflows

Indonesia’s rupiah rose to a 19-week high after foreign funds pumped money into local stocks as Jakarta Governor Joko Widodo announced he would run in July’s presidential election.

Overseas investors added $656 million to holdings of Indonesian equities, the most since May, on March 14 as the Indonesian Democratic Party of Struggle (PDI-P) said Widodo, known locally as Jokowi, would be its candidate. That helped push the Jakarta Composite index up 3.2 percent and into bull-market territory. A Jokowi administration would probably boost spending on infrastructure and public welfare, according to a report last month from CIMB Group Holdings Bhd.

The rupiah strengthened 0.6 percent to close at 11,293 per dollar, prices from local banks show. It reached 11,254 earlier, the highest level since Oct. 31. In the offshore market, one-month non-deliverable forwards advanced 0.1 percent to 11,329 per dollar, trading 0.3 percent weaker than the onshore rate, data compiled by Bloomberg show.

“Foreign funds are rushing in after the Jokowi news,” said Putra Perdana Akbar, a foreign-exchange dealer at PT Bank Rakyat Indonesia in Jakarta. “The rupiah strengthening too fast could weigh on exports, so that could become a concern, but strong inflows may continue to support the gains.”

Jokowi led in a January opinion poll by the Indonesian Survey Circle, attracting 35.6 percent of support, followed by 20.1 percent for Aburizal Bakrie of the Golkar party.

Bonds Rally

The JCI has risen more than 20 percent from an Aug. 27 low, the percentage of increase commonly defined as a bull market. PT CIMB Securities Indonesia, the nation’s second-largest brokerage, sees the JCI gaining a further 7 percent this year on the Jokowi nomination and possible presidency, analyst Erwan Teguh in Jakarta said after the market closed on March 14.

A fixing used to settle the rupiah forwards was set at 11,239 per dollar today, from 11,423 on March 14, by the Association of Banks in Singapore. Bank Indonesia’s onshore rate was placed at 11,272 today, from 11,421 last week.

One-month implied volatility, a measure of expected moves in the rupiah used to price options, dropped 24 basis points, or 0.24 percentage point, to 10.56 percent.

The yield on the government’s 8.375 percent bonds due March 2024 fell three basis points to 7.96 percent, according to the Inter Dealer Market Association.

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