Indonesia's Rupiah Gains Most in Asia on Inflows Before Stimulus

  • Foreign funds added $50 million to local stocks this week
  • President Widodo to announce fifth policy package on Thursday

The rupiah rose the most in Asia after foreign funds added to their stock and bond holdings amid speculation Indonesia’s economy is picking up and the Federal Reserve won’t raise interest rates this year.

Overseas investors bought a net $52 million of Indonesian shares in the four days through Thursday and pumped 2.67 trillion rupiah ($196 million) into local-currency sovereign debt in the first three days of the week, the latest available data show. President Joko Widodo is set to announce a fifth policy package to shore up the economy on Thursday, after saying he sees gross domestic product increasing 4.85 percent from a year earlier in the third quarter, more than 4.67 percent in the preceding period.

The rupiah snapped a four-day declining streak to gain 0.5 percent to 13,655 a dollar in Jakarta, prices from local banks show. The currency has rallied 7.4 percent this month in Asia’s best performance, paring its loss this year to 9.2 percent.

“We see some inflows supporting the rupiah as the market doesn’t buy the idea that the Fed is serious about raising rates in December,” said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The fourth policy package was responded to positively, so we’ll see what they have for the fifth one.”

The government cut energy prices and electricity tariffs for the industrial sector in its fourth round of stimulus last week, following measures to reduce red tape and speed up business permits. Indonesia attracted $7.4 billion of foreign direct investment in the third quarter, the same as in the previous period, according to figures released Thursday.

Public Spending

Indonesian public spending has seen a significant pickup since July and this is “really good news for growth,” Ndiame Diop, the World Bank’s lead economist for Indonesia, said at a briefing in Jakarta on Thursday. The government is on track to disburse 85 to 90 percent of its capital spending plan this year, Kunta W.D. Nugraha, the director of budget formulation at the Finance Ministry, said at the same briefing.

Futures contracts show a 32.3 percent chance of a U.S. rate cut this year, compared with 41.2 percent at the end of September.

The yield on the government bonds due September 2026 fell one basis points to 8.79 percent, according to the Inter Dealer Market Association. The yield has risen 13 basis points this week.

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