Bloomberg News

Rupiah Drops, Bonds Rally as Inflation Slows to Least Since 2010

March 01, 2012

Indonesia’s rupiah declined and bonds rallied for a third straight day as a government report showed consumer prices rose the least in two years last month.

Inflation slowed to 3.56 percent from a year earlier, down from 3.65 percent in January and less than the 3.8 percent median estimate of 20 economists surveyed by Bloomberg. The rupiah’s movements may be limited on speculation the central bank will intervene to support the currency, according to PT Bank ICBC Indonesia. Bank Indonesia has been intervening in the foreign-exchange and bond markets to curb volatility, Governor Darmin Nasution said on Feb. 10.

The rupiah weakened 0.4 percent to 9,111 per dollar as of 3:46 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg.

“I see it ranging between 9,050 and 9,150 today,” said Artanavaro Gasali, a Jakarta-based trader at PT Bank ICBC Indonesia. “Even as the rupiah weakens, Bank Indonesia tends to hold it in a range, so I see intervention keeping it around those levels.”

The yield on the government’s 7 percent bonds due May 2022 fell nine basis points, or 0.09 percentage points, to 5.48 percent, according to midday prices from the Inter Dealer Market Association.

The yield has climbed 15 basis points after Nasution said on Feb. 23 that a proposed reduction in fuel subsidies may cause inflation to exceed the central bank’s target of a maximum 5.5 percent this year.

The government will decide whether to raise subsidized fuel prices when it revises the 2012 state budget this month, Coordinating Minister for the Economy Hatta Rajasa said last week.

To contact the reporters on this story: Yudith Ho in Singapore at yho35@bloomberg.net;

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


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