Jan. 31 (Bloomberg) -- Indonesia’s rupiah rose this month in the best start to a year since 2008 after the country regained investment-grade status, spurring global funds to plow more cash into the nation’s bonds and stocks.
The currency advanced for a second month after Moody’s Investors Service raised its credit rating by one step to Baa3 on Jan. 18, following a similar move by Fitch Ratings in December. Standard & Poor’s, which rates Indonesia junk, may follow, according to Standard Chartered Plc, which forecast 10- year government bond yields will fall to new lows this quarter.
“Positive sentiment and confirmation from the rating companies would continue to support the rupiah and bond markets,” said Wiwig Santoso, head of treasury and markets at PT Bank DBS Indonesia in Jakarta. “Indonesia’s economy is still in a good position to continue to grow.”
The rupiah advanced 1.1 percent this month to 8,970 per dollar as of 4:18 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency climbed 0.5 percent from yesterday and may trade between 8,600 and 8,800 this quarter, Wiwig said.
Official data on Feb. 6 may show gross domestic product increased 6.45 percent in the final quarter of 2011 from a year earlier, versus 6.54 percent in the previous three months, according to the median estimate of economists in Bloomberg News survey. Southeast Asia’s biggest economy is “likely to stay on the upward trajectory,” Trade Minister Gita Wirjawan said in a Bloomberg TV interview on Jan. 29 from Davos, Switzerland.
The credit-rating upgrades, together with solid economic growth and external balances, should spur the rupiah’s appreciation, Standard Chartered said in a Jan. 30 research report. Emerging-market money managers may allocate more funds to Indonesia while central banks may add the nation’s bonds and currency to their reserves, it said.
Overseas investors bought about $280 million more local stocks than they sold this month, according to exchange data. They raised their holdings of government bonds to 230.4 trillion rupiah ($25.6 billion), up 3.4 percent from Dec. 31, government data show.
The yield on the 7 percent notes maturing in May 2022 fell 69 basis points this month to 5.41 percent, based on prices from the Inter-Dealer Market Association. The rate dropped four basis points, or 0.04 percentage point, today.
“Feedback from onshore investors reveals that they have ample cash to invest,” said Jennifer Kusuma, a rates strategist in Singapore at Standard Chartered, who forecast 10-year yields will drop to 5.25 percent this quarter. “Supply risks are also minimal.”
The government sold 1.32 trillion rupiah of bonds today, one-third more than planned, the finance ministry said. The sale included Islamic notes maturing in 2018, 2022 and 2027 and regular notes maturing in 2036.
--Editors: Ven Ram, Simon Harvey
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