Bloomberg News

Rupiah Advances on Speculation Rates Will Boost Demand for Bonds

December 12, 2011

Dec. 12 (Bloomberg) -- Indonesia’s rupiah gained on optimism overseas investors will boost purchases of the nation’s bonds after the central bank kept interest rates on hold.

Bank Indonesia kept its reference rate at 6 percent on Dec. 8 after cutting it in October and November. Foreign holdings of rupiah debt climbed 4.1 percent this month through Dec. 8, reversing a decline in November, after the central bank reduced debt supply and pledged to prevent its currency from becoming “too weak” amid concern the European debt crisis is worsening. Three-year government bonds rose.

“The BI decision and bond purchases are supporting the rupiah,” said Mika Martumpal, a senior market analyst at PT Bank Commonwealth in Jakarta. “The currency should continue to trade in a range against the dollar with a tendency to strengthen going into year-end.”

The rupiah rose 0.3 percent to 9,055 per dollar as of 3:51 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It may trade between 8,800 and 9,200 through year- end, Martumpal said.

The central bank expects the currency to trade between 8,900 and 9,000 in 2012, Deputy Governor Hartadi Sarwono told reporters in Jakarta today. The monetary authority plans to boost “intervention” to support the rupiah, Governor Darmin Nasution said on Nov. 30, after it reached a 17-month low of 9,240 the previous day. The rupiah has appreciated 0.9 percent this month.

Bond Auction Canceled

Overseas investors owned 223.61 trillion rupiah ($24.7 billion) of government securities, according to the latest data published by the debt management office. They cut holdings by 2.3 percent to 214.79 trillion rupiah in November.

The finance ministry canceled an auction of 10- and 20-year bonds on Dec. 6 because the government has sufficient cash reserves, Rahmat Waluyanto, director general at the debt management office, said in Jakarta on Dec. 1. The sales were the last scheduled for 2011, according to its auction calendar.

The yield on the 11 percent note due October 2014 dropped four basis points or 0.04 percentage point to 5.38 percent, according to the Inter-Dealer Market Association.

--Editors: Simon Harvey, James Regan

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To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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


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