Bloomberg News

Rupiah Falls on Speculation Importers Increased Dollar Purchases

October 25, 2011

Oct. 25 (Bloomberg) -- Indonesia’s rupiah declined for the third time in four days on speculation importers stepped up dollar purchases to pay month-end bills.

The MSCI Asia-Pacific Index of shares swung between gains and losses before European leaders meet tomorrow to discuss ways to resolve the region’s debt crisis. Speculation that Bank Indonesia will check the rupiah’s losses may support the currency, according to Gundy Cahyadi, an economist at Oversea- Chinese Banking Corp. The central bank is selling dollars when needed to ease market volatility, Deputy Governor Hartadi Sarwono said on Oct. 7.

“Typically, there is corporate demand at the end of the month and dollar liquidity becomes tight,” Singapore-based Cahyadi said. “The direction going forward will largely be determined by what happens in Europe. The central bank is also ensuring there is no big fluctuation in the currency.”

The rupiah dropped 0.1 percent to 8,848 per dollar as of 4:00 p.m. in Jakarta, according to prices from local banks complied by Bloomberg. The currency has fallen 0.4 percent this month.

The yield on the 8.25 percent note due July 2021 rose four basis points, or 0.04 percentage point, to 6.40 percent, according to closing prices from the Inter Dealer Market Association. The rate has slid 54 basis points this month, headed for the biggest monthly drop since March, as global funds boosted holdings of the nation’s notes.

International investors’ ownership of the nation’s sovereign debt rose to 219 trillion rupiah ($24.7 billion) as of Oct. 24 from 218 trillion rupiah at the end of last month, according to the finance ministry’s website.

--With assistance from Lilian Karunungan in Singapore. Editors: Ven Ram, Anil Varma

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

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


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