Bloomberg News

Rupiah Reaches One-Week High on Europe Optimism; Bonds Advance

July 30, 2012

Indonesia’s rupiah reached a one- week high and government bonds advanced after overseas investors purchased the nation’s assets amid optimism European leaders will be able to resolve their debt crisis.

Global funds bought $107 million more local stocks than they sold last week and added 1.57 trillion rupiah ($164 million) to their sovereign debt holdings, data from the exchange and finance ministry show. Germany and Italy agreed to “do everything to protect the euro area,” according to an e- mailed statement yesterday, echoing European Central Bank President Mario Draghi’s pledge last week. Indonesia posted trade deficits in April and May, official data show, and is due to release economic reports for June this week.

“Asian currencies and markets in general reacted positively to comments from European policy makers last week, however the rupiah has lagged,” said Prakriti Sofat, a regional economist at Barclays Plc in Singapore. “The underperformance is driven by continued concerns regarding a deteriorating current-account position.”

The rupiah strengthened 0.2 percent to 9,455 per dollar as of 4:21 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency reached 9,445, the highest level since July 18. One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 8 percent.

Consumer prices rose 4.64 percent in July, compared with 4.53 percent in June, according to the median estimate of 20 economists surveyed by Bloomberg before data due Aug. 1.

The yield on the government’s 7 percent bonds due May 2022 dropped three basis points, or 0.03 percentage point, to 5.73 percent, the lowest level since March 6, according to closing prices from the Inter Dealer Market Association.

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

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


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