Rupiah Rises Most in Two Months After Fed Pledges Rate Patience

The rupiah rose the most in two months after the Federal Reserve said it would be “patient” in its approach to raising interest rates, and on signs Bank Indonesia is propping up the currency.

The Indonesian currency climbed 0.8 percent, the most since Oct. 17, to 12,563 per dollar as of 4:14 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The rupiah rebounded from initial losses to close stronger in the last two sessions. It fell 1.9 percent on Dec. 15 to 12,698, the weakest close since August 1998 amid a selloff in emerging-market assets.

The U.S. central bank will probably hold rates near zero through at least the first quarter, Fed Chair Janet Yellen said yesterday after a two-day meeting. Bank Indonesia was in the market to defend the rupiah yesterday and on Dec. 16, Senior Deputy Governor Mirza Adityaswara said, adding that the monetary authority would refrain from intervening when the currency strengthened beyond 12,300 per dollar.

“The FOMC statement is positive for risk,” said Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore. Bank Indonesia “is going to be active just to reduce volatility. They will stick to their game plan,” he said.

One-month implied volatility, a measure of expected exchange-rate swings used to price options, declined 135 basis points, or 1.35 percentage points, to 13.72 percent.

Forwards, Bonds

In the offshore market, one-month non-deliverable forwards rose 1.4 percent to 12,693 per dollar, according to data compiled by Bloomberg. Bank Indonesia set a fixing used to settle the contracts at 12,565, 1.2 percent stronger than yesterday.

The central bank is comfortable with a rupiah level between 11,900 and 12,300, Adityaswara said yesterday. The monetary authority said it had bought 200 billion rupiah ($16 million) of sovereign debt in the secondary market on Dec. 16 following purchases of 1.5 trillion rupiah on Dec. 15.

The yield on Indonesia’s sovereign bonds due March 2024 fell 20 basis points to 8.21 percent, according to the Inter Dealer Market Association. The yield has increased 51 basis points this month.

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