Rupiah Snaps 3-Day Drop After Global Funds Raise Bond Holdings

Indonesia’s rupiah gained, snapping a three-day drop, after global investors raised holdings of the nation’s bonds. Government notes were steady.    

International funds bought Rp 1.6 trillion ($165 million) more sovereign notes than they sold last week, finance ministry data show. The MSCI Asia-Pacific Index of shares rose after European Union President Herman Van Rompuy submitted a 10- year road map to reshape the euro area through common banking supervision and deposit insurance ahead of a summit of the region’s leaders tomorrow.    

“We have seen foreign investors return to Indonesia’s bonds,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at Bank Negara Indonesia. “The rupiah is still driven by sentiment, and investors are expecting results from the summit that can produce long-term solutions.”    

The rupiah strengthened 0.3 percent, the most since June 15, to 9,475 per dollar as of 9:21 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency has lost 3.4 percent since March, headed for its biggest quarterly decline since the first three months of 2009.    

One-month implied volatility, which measures exchange-rate swings used to price options, dropped 50 basis points, or 0.5 percentage point, to 10 percent today.    

The yield on the government’s benchmark 10-year bonds was little changed at 6.27 percent, according to data compiled by Bloomberg. The yield rose 34 basis points this quarter and 24 basis points this year.

Bloomberg