Indonesia’s two-year government bonds advanced before a meeting today at which the central bank is forecast to leave borrowing costs unchanged for a 12th month. The rupiah fell, halting a three-day rally.
Bank Indonesia will keep its benchmark rate at 5.75 percent, according to all 17 analysts surveyed by Bloomberg. Consumer prices gained 4.57 percent last month from a year earlier, within the central bank’s 3.5 percent to 5.5 percent target range for 2013, official data show. Overseas investors added 4.06 trillion rupiah ($421 million) to their sovereign debt holdings last week, the biggest inflow since November, finance ministry data show. The rupiah gained 0.9 percent in the three days through Feb. 11.
“Bank Indonesia has little need to change its monetary policy as inflation is still manageable and the rupiah has returned to an appreciating trend,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at PT Bank Negara Indonesia. The rupiah may strengthen to 9,500 per dollar this quarter, she said.
The yield on Indonesia’s 11 percent bonds due October 2014 declined one basis point, or 0.01 percentage point, to 4.42 percent as of 8:54 a.m. in Jakarta, prices from the Inter Dealer Market Association show.
The rupiah dropped 0.2 percent to 9,638 per dollar, according to prices from local banks compiled by Bloomberg. Its one-month non-deliverable forwards fell 0.4 percent to 9,645 per dollar, 0.1 percent weaker than the spot rate. The contracts reached 9,610 yesterday, the highest level since Dec. 4.
A daily fixing used to settle the derivative contracts was set at 9,685 on Feb. 8 by the Association of Banks in Singapore. Markets in the city-state were closed yesterday and today for the Chinese New Year holiday.
The rupiah’s one-month implied volatility, which measures expected moves in exchange rates used to price options, was unchanged at 6.5 percent for a seventh day.
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