Rupiah Appreciates After Funds Boost Indonesian Stock Holdings

Indonesia’s rupiah advanced for a second day after overseas investors boosted holdings of the nation’s assets to benefit from growth in Southeast Asia’s biggest economy. 

The currency has gained 1.7 percent this month as official data showed gross domestic product rose 6.9 percent in the fourth quarter, the most since 2004, and Bank Indonesia raised borrowing costs for the first time in more than two years on Feb. 4. Exchange data show global funds bought $231.7 million more local shares than they sold this month, and the government said on Feb. 11 that foreign holdings of the nation’s debt rose 2 percent from the end of January to 199 trillion rupiah ($22.4 billion). 

“Foreign funds are coming in, they are expecting at least one of two more interest-rate hikes by Bank Indonesia in the first half of this year,” said Mika Martumpal, a senior market analyst at PT Bank Commonwealth in Jakarta. “The earlier increase showed that Bank Indonesia is more focused on fighting inflation.” 

The rupiah gained 0.1 percent from Feb. 14 to 8,904 per dollar as of 9:04 a.m. in Jakarta, according to data compiled by Bloomberg. It has strengthened 0.8 percent this year, the most among Asia’s 10 most-traded currencies. Indonesia’s financial markets were closed for a public holiday yesterday. 

Bank Indonesia raised its reference rate to 6.75 percent this month from a record-low 6.50 percent, citing price pressures. Inflation accelerated to 7.02 percent in January from 6.96 percent in December, according to official data. The central bank meets next on March 4 to review its policy rate. Source:  Bloomberg