Bloomberg News

Rupiah Heads for Weekly Drop on Rate-Cut Speculation; Bonds Fall

January 06, 2012

Jan. 6 (Bloomberg) -- Indonesia’s rupiah headed for a third weekly decline on speculation slowing inflation provides the central bank with an opportunity to cut its benchmark interest rate. Government bonds fell.

Bank Indonesia sees room to reduce borrowing costs if needed, Deputy Governor Hartadi Sarwono said in Singapore yesterday. Governor Darmin Nasution left the rate unchanged at 6 percent last month and the next review is on Jan. 12. Inflation in December was the least in 21 months, data showed this week.

“Another interest-rate cut of 25 to 50 basis points is expected in the first quarter,” said Wiwig Santoso, head of treasury and markets at PT Bank DBS Indonesia in Jakarta.

The rupiah dropped 1.4 percent this week to 9,198 per dollar as of 9 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency was down 0.1 percent today, its fifth day of declines.

Consumer prices in Indonesia rose 3.79 percent in December from a year earlier after increasing 4.15 percent the previous month, the Central Bureau of Statistics said Jan. 2.

The yield on the government’s 7 percent bonds due May 2022 rose six basis points, or 0.06 percentage point, this week through yesterday to 6.16 percent, according to prices from the Inter-Dealer Market Association.

--Editors: Andrew Janes, Ven Ram

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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