Bloomberg News

Rupiah Falls a Third Day as Italy Rating Cut Adds to Europe Woes

October 05, 2011

Oct. 5 (Bloomberg) -- Indonesia’s rupiah fell for a third day as a delay among European nations to come up with a new aid package for Greece and a credit-rating cut for Italy reduced demand for higher-yielding emerging-market assets.

The MSCI Asia-Pacific Index of shares dropped to its lowest level in more than two years and overseas investors were net sellers of Indonesian equities for a second day yesterday. Moody’s Investors Service lowered Italy’s sovereign rating by three levels to A2 on concern about the government’s ability to rein in its debt, which is the second largest in the euro region.

“The rupiah is weak because of the negative sentiment from the global financial turbulence,” said Rully Nova, a foreign- exchange analyst at PT Bank Himpunan Saudara in Jakarta. “Bank Indonesia is still in the market to protect the rupiah.”

The currency declined as much as 0.7 percent before trading 0.1 percent weaker at 8,913 per dollar as of 4:13 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It dropped 2.9 percent in September, the biggest monthly decline since February 2009.

Bank Indonesia will stabilize the rupiah, Hendar, the authority’s director of monetary policy who uses a single name, said in a mobile-phone text message on Oct. 3. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.

Funds based abroad sold $111 million more Indonesian stocks than they bought this week, exchange data show. The Jakarta Composite Index of shares has dropped 7.2 percent since Sept. 30.

Bonds declined for a second day. The yield on the government’s 8.25 percent notes due July 2021 increased 10 basis points, or 0.10 percentage point, to 7.16 percent, according to closing prices from the Inter Dealer Market Association.

--Editors: Simon Harvey, Ven Ram

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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