Bloomberg News

Indonesian Rupiah Advances After China Reduces Reserves Ratio

December 01, 2011

Dec. 1 (Bloomberg) -- The rupiah gained the most in a month on optimism China’s decision to cut the amount of cash that the nation’s banks must set aside as reserves will boost Indonesian shipments to its third-biggest export market.

The currency advanced for a second day as the MSCI Asia Pacific Index of regional stocks rose after six central banks led by the Federal Reserve made it cheaper for lenders to borrow dollars. Bank Indonesia plans to boost “intervention” in the market to support the rupiah, Governor Darmin Nasution said yesterday, a day after the currency reached a 17-month low.

“The decisions by central banks and by China have cheered the global financial markets,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “All Asian currencies are following the trend. Bank Indonesia seems to be comfortable with the current level of the rupiah.”

The rupiah appreciated 0.5 percent to 9,095 per dollar as of 9 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency reached 9,240 on Nov. 29, the weakest level since June 2010.

The central bank is committed to buying government bonds in the secondary market, Perry Warjiyo, director for economic research and monetary policy, said Nov. 29. Bank Indonesia unexpectedly reduced its benchmark interest rate by 50 basis points to 6 percent on Nov. 10 to boost growth.

The yield on the government’s benchmark 8.25 percent notes due July 2021 fell seven basis points, or 0.07 percentage point, to 6.78 percent yesterday, according to the Inter-Dealer Market Association.

--Editors: Sandy Hendry, Andrew Janes

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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