Bloomberg News

Rupiah Declines as Europe Split on Crisis Measures; Bonds Rise

October 20, 2011

Oct. 20 (Bloomberg) -- Indonesia’s rupiah fell for the first time this week as divisions among European leaders over how to resolve the region’s debt crisis damped demand for higher-yielding emerging-market assets. Bonds rose.

French Finance Minister Francois Baroin said yesterday that Europe’s bailout fund would be best enhanced with help from the European Central Bank, a position the ECB and German government oppose. The rupiah recouped losses toward the close of trading in the past two days on speculation the central bank intervened. Bank Indonesia is selling the dollar when needed to ease volatility, Deputy Governor Hartadi Sarwono said on Oct. 7.

“Europe’s debt issues are influencing the regional markets including the rupiah,” said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. The declines in the currency “may be limited as the central bank is looking to reduce volatility,” he said.

The rupiah dropped 0.3 percent to 8,825 per dollar as of 4:15 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency slipped as much as 0.7 percent earlier.

The yield on the government’s benchmark 10-year bonds dropped four basis points, or 0.04 percentage point, to 6.31 percent today, according to the Inter-Dealer Market Association.

--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: James Regan at jregan19@bloomberg.net.


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