Rupiah Falls After Bank Indonesia Intervention
October 27, 2010
Jakarta. The rupiah fell the most in six weeks after the central bank said the potential for further appreciation was limited.
The currency reached a three-year high on Monday after the Group of 20 nations pledged over the weekend to refrain from weakening their currencies.
Bank Indonesia sees the rupiah’s “fundamental” level at 8,900 to 9,300 against the US dollar, Governor Darmin Nasution said on Wednesday. The central bank will “guard” the rupiah at its fundamental level and buy foreign currencies to control the local currency’s volatility, he said.
“The authorities don’t seem keen to allow for substantial exchange-rate appreciation,” Taimur Baig, chief economist at Deutsche Bank in Singapore, the world’s biggest currency trader, wrote in a note on Wednesday.“
As equity and bond market rallies continue and the rupiah remains under sustained appreciation pressure, the risk of capital controls is rising.”
The rupiah weakened 0.3 percent to 8,943 per dollar as of the market’s close in Jakarta.
The currency has gained 5 percent this year and reached 8,896 on Monday, its strongest level since June 2007.
Bank Indonesia has intervened to prevent the rupiah from becoming too strong, Deputy Governor Halim Alamsyah said on Friday without elaborating.
Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
Indonesia’s local-currency bonds are this year’s best performers among Asia’s 10 biggest economies excluding Japan, returning 25 percent, according to HSBC Holdings.
Foreign ownership of the debt rose to Rp 190.7 trillion ($21.3 billion) as of Friday, from Rp 108 trillion at the end of 2009, according to the Finance Ministry.
Overseas investors have bought a net $2.3 billion of Indonesian equities so far this year, helping drive the Jakarta Composite Index to a record high on Tuesday.
Ten-year government bonds fell for a seventh straight day, their longest losing streak this year, on concern that the authorities will impose further measures aimed at curbing foreign demand to slow the rupiah’s gains.
“We would not be surprised to see the authorities imposing a longer holding period on government securities,” Baig wrote.
The yield on the 11 percent note due November 2020 climbed 13 basis points, or 0.13 percentage point, to 7.36 percent, according to midday prices from the Inter Dealer Market Association.
The rate slid to 7.02 percent on Oct. 14, the lowest level since the note was issued in 2005.
Bloomberg
October 27, 2010
Jakarta. The rupiah fell the most in six weeks after the central bank said the potential for further appreciation was limited.
The currency reached a three-year high on Monday after the Group of 20 nations pledged over the weekend to refrain from weakening their currencies.
Bank Indonesia sees the rupiah’s “fundamental” level at 8,900 to 9,300 against the US dollar, Governor Darmin Nasution said on Wednesday. The central bank will “guard” the rupiah at its fundamental level and buy foreign currencies to control the local currency’s volatility, he said.
“The authorities don’t seem keen to allow for substantial exchange-rate appreciation,” Taimur Baig, chief economist at Deutsche Bank in Singapore, the world’s biggest currency trader, wrote in a note on Wednesday.“
As equity and bond market rallies continue and the rupiah remains under sustained appreciation pressure, the risk of capital controls is rising.”
The rupiah weakened 0.3 percent to 8,943 per dollar as of the market’s close in Jakarta.
The currency has gained 5 percent this year and reached 8,896 on Monday, its strongest level since June 2007.
Bank Indonesia has intervened to prevent the rupiah from becoming too strong, Deputy Governor Halim Alamsyah said on Friday without elaborating.
Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
Indonesia’s local-currency bonds are this year’s best performers among Asia’s 10 biggest economies excluding Japan, returning 25 percent, according to HSBC Holdings.
Foreign ownership of the debt rose to Rp 190.7 trillion ($21.3 billion) as of Friday, from Rp 108 trillion at the end of 2009, according to the Finance Ministry.
Overseas investors have bought a net $2.3 billion of Indonesian equities so far this year, helping drive the Jakarta Composite Index to a record high on Tuesday.
Ten-year government bonds fell for a seventh straight day, their longest losing streak this year, on concern that the authorities will impose further measures aimed at curbing foreign demand to slow the rupiah’s gains.
“We would not be surprised to see the authorities imposing a longer holding period on government securities,” Baig wrote.
The yield on the 11 percent note due November 2020 climbed 13 basis points, or 0.13 percentage point, to 7.36 percent, according to midday prices from the Inter Dealer Market Association.
The rate slid to 7.02 percent on Oct. 14, the lowest level since the note was issued in 2005.
Bloomberg