Rupiah Rallies on Optimism Faster State Spending to Spur Growth

  • President Widodo breaks ground on $5 billion rail project
  • Foreign-direct investment up 7% to $7.9 billion last quarter

Indonesia’s rupiah rose the most in a week on optimism faster state spending will spur economic growth and as figures showed a pickup in foreign-direct investment last quarter.

President Joko Widodo hosted a groundbreaking ceremony for a $5 billion Jakarta-Bandung train line on Thursday that was previously at risk of being delayed. Indonesia boosted capital spending in the fourth quarter to 90 percent of its full-year target, compared with 60 percent at the end of September, Finance Ministry data show. Foreign investment in Indonesia rose by 7 percent to $7.9 billion in the fourth quarter from the previous three months, the Investment Coordinating Board said Thursday.

The rupiah closed 0.4 percent stronger at 13,909 a dollar in Jakarta, the most since Jan. 13, prices from local banks compiled by Bloomberg show. The currency has weakened 1.4 percent over the past three months, the best performance among Asian emerging markets.

“The pickup in capital expenditure in the fourth quarter suggests improving efficacy of the government’s push in infrastructure implementation,” said Dushyant Padmanabhan, a strategist at Nomura Holdings Inc. in Singapore. “We are more upbeat on the Indonesia growth outlook, equities and currency.”

Outlays on infrastructure will help boost economic expansion to as much as 5.3 percent in 2016, according to the Asian Development Bank, from an estimated 4.7 percent last year.

The Investment Coordinating Board is set to announce 2015 investments realization data on Thursday. The falling price of oil may cause inflation to ease, giving Bank Indonesia more room to cut its policy rate after a reduction last week, said Juda Agung, executive director of monetary policy, was cited as saying in the Kontan newspaper.

The yield on benchmark 10-year bonds declined seven basis points to 8.53 percent, according to the Inter Dealer Market Association. The yield has dropped 22 basis points this year.

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