Bloomberg News

Indonesian Rupiah Declines After S&P Warns of Europe Downgrades

December 06, 2011

Dec. 6 (Bloomberg) -- Indonesia’s rupiah weakened on concern Europe’s worsening debt crisis will slow global growth and reduce demand for emerging-market assets.

The MSCI Asia-Pacific Index of regional stocks snapped a six-day rally after Standard & Poor’s said yesterday it may cut the credit ratings of Germany, France and 13 other euro-area countries. Bank Indonesia said last week it will buy government bonds as foreign holdings of the debt dropped 2.2 percent in the four days through Dec. 1 to 214.55 trillion rupiah ($23.6 billion), according to finance ministry data.

“Regional stocks declined after S&P warned of credit- rating downgrades,” said Mika Martumpal, a senior market analyst at PT Bank Commonwealth in Jakarta. “Bank Indonesia is maintaining its presence in the market to make sure there is no volatile movement in the currency.”

The rupiah dropped 0.3 percent to 9,085 per dollar as of 10:16 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The central bank plans to boost “intervention” to support the currency, Governor Darmin Nasution said Nov. 30, a day after the rupiah reached a 17-month low of 9,240.

Bank Indonesia will keep its benchmark interest rate at 6 percent on Dec. 8, according to 15 of 19 economists surveyed by Bloomberg. Four predict a quarter of a percentage point cut. Perry Warjiyo, the central bank’s director of economic research and monetary policy, said yesterday policy makers will weigh the impact of November’s 50-basis point cut on capital flows. A basis point is 0.01 percentage point.

--Editors: Andrew Janes, James Regan

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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