Bloomberg News

Rupiah Strengthens Most in a Week as Stocks Rally; Bonds Drop

March 27, 2012

Indonesia’s rupiah advanced the most in almost a week as stocks rallied after the Federal Reserve signaled it will keep U.S. borrowing costs near zero, boosting demand for higher-yielding assets. Bonds fell.

The Jakarta Composite Index (JCI) of shares gained 1.2 percent after Fed Chairman Ben S. Bernanke said yesterday monetary policy will remain accommodative to focus on creating jobs. At least 3,000 protesters, less than the 8,000 the police had been expecting, took to the streets in Jakarta today to demonstrate against a plan to raise the price of subsidized fuel by 33 percent.

“The stock market is rising, boosting the rupiah,” said Mika Martumpal, an analyst at PT CIMB Bank Niaga in Jakarta. “From the domestic side, I think the people’s rejection of the fuel-price hikes was not as bad as feared.”

The rupiah advanced 0.4 percent to 9,158 per dollar as of 4:19 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency has declined 1 percent this quarter. One-month implied volatility in the rupiah, which measures exchange-rate swings used to price options, was unchanged at 8.25 percent.

The government is proposing raising the price of diesel and low-octane gasoline to 6,000 rupiah ($0.65) per liter. The legislature will vote on the government’s proposed revisions to the 2012 budget, which include the fuel-price rises, on March 29. Inflation could reach 6.8 percent in 2012 if the increases are implemented, central bank Governor Darmin Nasution said March 8. Consumer prices rose 3.6 percent last month from a year earlier.

The yield on the 7 percent bond due May 2022 increased four basis points, or 0.04 percentage point, to 5.95 percent, according to final prices from the Inter Dealer Market Association.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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


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