Dec 22, 2014 4:26 AM ET
Indonesia’s rupiah strengthened for a fifth day, the longest rising streak in 10 months, on speculation some investors are buying local-currency debt to take advantage of recent declines.
Global funds have pulled 22.9 trillion rupiah ($1.8 billion) from rupiah sovereign notes this month through Dec. 19, finance ministry data show. That helped push the 10-year yield to as high as 8.45 percent last week, more than double the level on similar-maturity Malaysian notes. The government will announce the magnitude of its planned fixed fuel subsidies “soon” and seek parliamentary approval next month, Sofyan Djalil, coordinating minister for the economy, said today.
“The market is repositioning as being short rupiah is painful considering the rates, especially near the year-end,” said Irene Cheung, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “I’m in favor of the government taking advantage of low oil prices to do away with subsidies, so it won’t keep coming back to haunt them.”
The rupiah advanced 0.4 percent to 12,439 a dollar, prices from local banks show. It has gained 2.1 percent in five days through today, paring its monthly loss to 1.9 percent. Finance Minister Bambang Brodjonegoro said Dec. 19 that he sees a “new equilibrium” for the rupiah at 12,000 to 12,500.
Intervention Target
The central bank remains in the market to stabilize the currency and will stop intervening when it strengthens beyond 12,300 per dollar, Senior Deputy Governor Mirza Adityaswara said Dec. 17. The monetary authority also said last week that it had been buying Indonesian local-currency sovereign debt on the secondary market.
The yield on Indonesia’s government bonds due March 2024 fell seven basis points, or 0.07 percentage point, to 7.98 percent, the lowest level since Dec. 10, prices from the Inter Dealer Market Association show. The yield has dropped 46 basis points since closing at a two-month high on Dec. 15.
One-month non-deliverable rupiah forwards traded offshore were little changed at 12,540, data compiled by Bloomberg show. Bank Indonesia set a fixing used to settle the contracts at 12,435 today, from 12,500 on Dec. 19.
original source: http://www.bloomberg.com/news/2014-12-22/indonesian-rupiah-rises-in-longest-winning-streak-since-february.html