Indonesia’s rupiah rebounded from a two-month low after the government said it would probably delay a plan to raise electricity prices.
The currency dropped as much as 0.4 percent earlier on concern a proposed fuel-cost increase will spur inflation. Policy makers will now likely wait until 2013 to lift power tariffs to mitigate the impact of costlier fuel, Energy Minister Jero Wacik said in Jakarta today. Gains in consumer prices may accelerate to 6.8 percent from last month’s 3.56 percent if the price of fuel is increased by 1,500 rupiah ($0.16) per liter, Bank Indonesia Governor Darmin Nasution said on March 8.
“The delay lends positive sentiment for the market,” said Putu Andi Wijaya, a foreign-exchange dealer at PT Bank Rakyat Indonesia in Jakarta. “But we know the concern is still on higher fuel prices.”
The rupiah gained 0.1 percent to 9,168 per dollar as of 4:53 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency reached 9,218 today, the weakest level since Jan. 16. One-month implied volatility in the rupiah, which measures exchange-rate swings used to price options, held at 8.25 percent, the lowest level since Feb. 15.
Bank Indonesia will continue to observe and intervene in the foreign-exchange and bond markets to stabilize the currency, according to a statement posted on its website last week.
“The central bank will likely step in between 9,190 and 9,200,” said Aris Setiawan, a foreign-exchange trader at PT Rabobank International Indonesia in Jakarta.
The yield on the government’s 7 percent bonds due May 2022 gained five basis points, or 0.05 percentage point, to 6.02 percent, according to closing prices from the Inter Dealer Market Association. That was the highest yield since Jan. 17, the day before Indonesia won a credit-rating upgrade from Moody’s Investors Service which returned it to investment level.
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