Indonesia’s Rupiah Advances as Asian Stocks Rally; Bonds Gain

By Lilian Karunungan

Nov. 25 (Bloomberg) -- Indonesia’s rupiah rose, paring its biggest loss in four weeks yesterday, as a rally in Asian stocks fueled speculation overseas investors will buy more of the nation’s assets. Government bonds advanced.

The rupiah was the second-best performer of the 10 most- traded currencies in Asia outside Japan today as the Jakarta Composite Index of shares rallied almost 2 percent after six days of losses. The MSCI Asia-Pacific Index of shares jumped the most in three weeks after the U.S. government guaranteed $306 billion of troubled Citigroup Inc. assets, bolstering confidence in the world’s biggest economy.

“There is positive sentiment coming from stocks” and that is boosting the rupiah, said Wiling Bolung, head of treasury at ANZ Panin Bank Jakarta, a unit of Australia’s third-largest bank. Even so, he added, “there is always regular demand from corporations buying dollars for their own needs, such as imports and loans.”

The rupiah gained 0.4 percent to 12,650 per dollar as of 1:37 p.m. in Jakarta, according to data compiled by Bloomberg. The local currency touched 13,150 on Nov. 21, the weakest level in a decade.

Two-year bonds ended two days of losses on speculation the central bank will lower interest rates next month to support the faltering economy. Bank Indonesia raised borrowing costs six times this year to 9.5 percent from 8 percent to curb inflation.

Debt Sales

The securities also rallied on optimism bond issuance will decline. The government is cutting local debt sales next year and plans to borrow from the World Bank, Australia and the Asian Development Bank to fund its budget shortfall, Rahmat Waluyanto, director general of the finance ministry’s debt management department, said in an interview in Jakarta on Nov. 21.

“The market is expecting Bank Indonesia will probably cut the interest rate next month,” ANZ’s Bolung said. Potential loans from the World Bank and the Asian Development bank “provide comfort to the market.”

The yield on the 13.4 percent note due February 2011 fell 89 basis points, or 0.89 percentage point, to 16.60 percent, according to midday prices at the Inter Dealer Market Association. The price gained 1.5193, or 15,193 rupiah per 1 million rupiah face amount, to 94.1880. A basis point is 0.01 percentage point.

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