Indonesian Rupiah Advances to Four-Week High on Cabinet Optimism

Indonesia’s rupiah rose to the strongest level in almost a month on optimism President Joko Widodo will name a cabinet seen as capable of helping him carry out economic reforms and boost growth.

Widodo, known as Jokowi, was inaugurated yesterday and may announce his ministers as early as today. Bambang Brodjonegoro, vice finance minister in the previous government, and former trade and industry minister Rini Soemarno are on the shortlist for cabinet posts, according to people familiar with the matter. The heads of the state-owned rail and ports companies were also cited as candidates by the people, who asked not to be identified because the discussions are private.

“Yesterday’s inauguration went well, which was a relief to investors,” said Dian Ayu Yustina, a Jakarta-based economist at PT Bank Danamon Indonesia. “The names circulating in the market are encouraging, so we’re optimistic.”

The rupiah gained 0.3 percent to close at 12,001 per dollar, prices from local banks show. The currency touched 11,970 earlier, the strongest since Sept. 25. One-month non-deliverable forwards traded offshore rose 0.2 percent to 12,065 per dollar, 0.5 percent weaker than the onshore spot rate, data compiled by Bloomberg show.

Mending Rifts

The rupiah has rallied 2.1 percent in the three days through today after Jokowi met with losing presidential candidate Prabowo Subianto on Oct. 17, the first time the two had appeared in public together since July’s election. That followed a meeting with Aburizal Bakrie, the leader of Golkar, the second-biggest political party in parliament and the biggest in the coalition opposing Widodo, on Oct. 14.

“I’m optimistic that Jokowi’s lunchtime diplomacy will be effective in mending any rifts between the coalitions and earning his government support,” Bank Danamon’s Yustina said.

Bank Indonesia set a fixing used to settle the non-deliverable forwards at 11,993 per dollar today, from 12,041 yesterday. One-month implied volatility, a measure of expected exchange-rate swings used to price options, declined 40 basis points, or 0.40 percentage point, to 10.24 percent, according to data compiled by Bloomberg.

The yield on the government’s 8.375 percent bonds due March 2024 dropped four basis points to 8.04 percent, the lowest level since Sept. 8, according to the Inter Dealer Market Association.

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