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Rupiah stronger this week, bonds gain on optimism as stocks rise
The rupiah advanced this week against the U
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The rupiah advanced this week against the U.S. dollar on positive sentiment that investors would buy the currency as stocks gained, and partly due to central bank restrictions on the purchase of the American greenback.
The rupiah strengthened by 5.3 percent this week to 11,115 per dollar at 4:28 p.m. Friday in Jakarta, Bloomberg reported. The local currency was the second best performer this week among the region's 10 most active currencies, excluding the Japanese yen.
Overseas investors bought more Indonesian stocks this week, while the Jakarta Composite Index had a 5 percent gain.
The central bank has introduced a regulation under which the purchase of foreign currencies equivalent to more than US$100,000 through spot, forward, or derivative transactions for Indonesian citizens and firms, must be supported by clear underlying transactions and justifying documents.
The rupiah also gained after the central bank cut its interest rate by 25 basis points to 9.25 percent early this month, Bank Mandiri chief economist Mirza Adityaswara said.
Bank Indonesia (BI) had aggressively increased the rate from 8 percent in May to 9.5 percent in October to curb inflation, and maintained it at 9.5 percent in November before slashing it by 25 basis points as inflation slowed.
BI governor Boediono said the central bank would seek to maintain the rupiah at a "good and stable" level, considering Indonesia's macreconomic conditions.
"Currencies rise and fall due to supply and demand. We will keep the rupiah at a good and stable level, based on what is needed by our macroeconomy," he said.
"We cannot dictate the market, but we can do something in the market. We have ammunition, which will increase in the coming months." He did not elaborate.
BI's foreign exchange reserves stood at $50.18 billion on Nov. 28, a slight drop from $50.58 billion on Oct. 31. BI expected another $2 billion addition for its reserves, coming from the World Bank as a program loan.
Meanwhile, 10-year government bonds rose for the third time this week. The yield on the 9 percent note maturing September 2018 fell 3.5 basis points to 13.06 percent, according to the Government Securities Inter Dealer Market Association, while the price rose 0.1617 to 77.93.
The government said it might issue dollar-denominated Islamic bonds (sukuk) in February nexy year, but subject to the market conditions.
"It is very much depending on the market conditions. We will not issue (global sukuk) if the market conditions are similar to what they are now," said Dahlan Siamat, the Finance Ministry's director of sharia financing policy.
