Indonesia’s Rupiah Gains as Central Bank Signals Intervention

By Lilian Karunungan

Feb. 3 (Bloomberg) -- Indonesia’s rupiah rose for the first time in four days after the central bank said yesterday that it may use bilateral swap agreements to help boost the currency.

The rupiah has declined 7 percent so far this year, the second-biggest loser among Asia’s 10 most-active currencies outside Japan, as the global economic slump reduced investor appetite for riskier emerging-market assets. Bank Indonesia is concerned about the slump in the global economy, said Benny Santoso at PT Bank Rakyat.

“BI has promised they will still be in the market,” said Santoso, treasury manager in Jakarta at the nation’s second- largest bank. “They’re pushing the rupiah to be below 12,000.”

The rupiah rose 0.5 percent to 11,690 per dollar as of 9:57 a.m. in Jakarta, from 11,750 yesterday, according to data compiled by Bloomberg. The currency, which yesterday touched 12,000, the lowest level since Dec. 5, may trade between 11,500 and 12,000 today, Santoso forecast.

The central bank will sign a currency swap agreement with Japan this month for “additional ammunition from outside our foreign-exchange reserves,” Governor Boediono told reporters in Jakarta yesterday, without providing details.

“Bank Indonesia is threatening to use bilateral foreign- exchange swap lines to help support the rupiah, but this won’t do anything but smooth the moves,” Win Thin, a senior foreign- exchange strategist at Brown Brothers Harriman & Co. in New York, wrote in a note to clients yesterday.

The currency will fall to 12,188, Thin predicted, without providing a timeframe.

Non-deliverable forwards contracts signal traders are betting the rupiah will weaken to 12,370 per dollar in three months, compared with odds yesterday for a rate of 12,625. Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.

Central banks intervene by arranging purchases or sales of currencies to influence an exchange rate. Indonesia’s foreign- exchange reserves fell to $51.64 billion in December from $57.11 billion in late September, a sign that Bank Indonesia may have intervened to support its currency.

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