Bloomberg News

Rupiah Declines for a Fourth Day After Bank Indonesia Cuts Rate

October 12, 2011

Oct. 12 (Bloomberg) -- Indonesia’s rupiah declined for a fourth day, its longest losing streak in almost a month, after the central bank unexpectedly cut its benchmark interest rate yesterday.

Bank Indonesia lowered its reference rate by 25 basis points to 6.50 percent after holding it steady for seven months, citing easing inflation. All 15 analysts in a Bloomberg survey had predicted that the rate would stay unchanged. The currency has slid 1.8 percent this month as foreign funds sold $55 million more Indonesian shares than they bought through yesterday, according to exchange data.

“The rupiah is declining because of the rate cut,” said Bambang Eko Joewono, the Jakarta-based head of the global- markets division at PT Bank UOB Indonesia. “We have also seen foreign investors exiting the market.”

The rupiah dropped 0.2 percent to 8,928 per dollar as of 4:10 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It slid as much as 0.6 percent earlier.

Bank Indonesia’s foreign-exchange reserves remain above the level considered “safe” and the central bank is selling dollars when needed to ease volatility in the rupiah, Deputy Governor Hartadi Sarwono said on Oct. 7.

The yield on the government’s benchmark 8.25 percent bonds due July 2021 fell two basis points, or 0.02 percentage point, to 6.56 percent today, according to the Inter-Dealer Market Association. The rate dropped for a fifth day.

--Editors: Greg Ahlstrand

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

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


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