Rupiah Rises to Highest Since February After Fed Rate Bets Pared

Indonesia’s rupiah rose to the highest level since February on bets the Federal Reserve will delay increasing interest rates and after the nation reported the widest trade surplus in more than a year.

The Bloomberg Dollar Spot Index, which measures the greenback against 10 major peers, reached a one-week low after data Wednesday showed U.S. industrial output fell more than analysts expected in March. Indonesia’s exports exceeded imports by $1.13 billion last month, the statistics office reported Wednesday, compared with the $589 million surplus estimated in a Bloomberg survey of economists.

“Domestic numbers are supporting the rupiah, but the biggest driver will remain the outlook for Fed rates,” said Aldian Taloputra, an economist at PT Mandiri Sekuritas, a unit of the nation’s largest lender by assets. “Slowing growth damped imports while low crude prices helped ease the oil and gas deficit, but we see the trade surplus narrowing from here.”

The rupiah rose 0.4 percent to close at 12,858 a dollar in Jakarta, according to prices from local banks. The currency climbed to 12,805 earlier, the strongest level since Feb. 23. One-month non-deliverable forwards advanced 0.7 percent to 12,972, the biggest gain since March 19, data compiled by Bloomberg show.

Government bonds fell, with the yield on notes due March 2024 rising 10 basis points, or 0.10 percentage point, to 7.49 percent, according to the Inter Dealer Market Association.

Bank Indonesia, which held its benchmark interest rate at 7.5 percent for a second month on April 14, will cut it to 6.75 percent by the year-end, Tim Condon, head of Asia research at ING Groep NV, wrote in a research note Thursday.

“A swelling trade surplus will alleviate current-account anxiety and enable Bank Indonesia to get back into the business of cutting interest rates,” he wrote.

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