Bloomberg News

Rupiah, Bonds Complete Weekly Decline on Growth Cut, Europe

November 20, 2011

Nov. 18 (Bloomberg) -- Indonesia’s rupiah completed a third weekly drop after the central bank cut its 2012 economic growth forecast on concern Europe’s debt crisis will hurt exports. Bonds declined.

The currency reached a seven-week low today after Bank Indonesia reduced its estimate to 6.5 percent from 6.7 percent on Nov. 15. New York-based Fitch Ratings said this week Europe’s debt woes pose a “serious risk” to U.S. lenders. The Indonesian central bank unexpectedly cut its benchmark interest rate by 50 basis points to 6 percent last week to boost economic activity.

“The negative sentiment is coming from the developments in Europe,” said Enrico Tanuwidjaja, a currency strategist at Malayan Banking Bhd. in Singapore. Bank Indonesia “thinks there is a downside risk to growth so it cut the interest rates more than expected.”

The rupiah slipped 0.6 percent this week to 9,023 per dollar as of 4 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency fell 0.3 percent today and reached 9,078, the weakest level since Sept. 26. The rupiah fell as much as 0.9 percent earlier.

The central bank said in October it has sufficient foreign-exchange reserves to defend the currency.

The yield on the government’s benchmark 8.25 percent bonds due July 2021 increased 12 basis points, or 0.12 percentage point, this week to 6.35 percent, according to prices from the Inter-Dealer Market Association. The rate rose five basis points today.

The government sold $1 billion of Islamic bonds due 2018 this week at a yield of 4 percent, less than half the rate at which it sold its debut dollar sukuk in 2009.

--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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