Indonesian rupiah in longest rally since 2010 as equities and bonds advance

[SINGAPORE] Indonesia's rupiah rose for a 10th day in its longest winning streak since 2010 amid speculation the central bank won't cut interest rates too aggressively.

The currency strengthened 0.6 per cent to 13,278 a US dollar as of 12:19 pm in Jakarta, according to prices from local banks, and rose to the highest level since Oct 15 earlier. It's rallied 1.8 per cent since Feb 17. The Jakarta Composite Index climbed one per cent, gaining for a sixth day, as developing-nation assets rose Wednesday after US manufacturing data beat estimates and on speculation previous losses were overdone.

Indonesia's government has been calling on the central bank to cut borrowing costs faster to spur growth, with President Joko Widodo saying in an interview last month that he wanted the key rate to "fall, fall, fall, fall and keep falling."

Bank Indonesia lowered borrowing costs in January and February but, given a quickening in inflation last month, it's unlikely to ease too fast, said Andy Ji, foreign-exchange strategist at Commonwealth Bank of Australia in Singapore.

"The Indonesian rupiah is a high-yielding currency that benefits from the risk-on sentiment," he said.

"People are not expecting aggressive rate cuts."

Inflation was 4.42 per cent in February, compared with 4.14 per cent in January and the median estimate of 4.36 per cent in a Bloomberg survey.

The yield on the sovereign bonds due Sept 2026 fell 13 basis points, the biggest drop since Jan 29, to 8.14 per cent, according to the Inter Dealer Market Association.

Indonesian debt is "one of our stronger calls going forward" because it has the highest yield in Asia, said Jens Nystedt, the New York-based portfolio manager of emerging-market debt at Morgan Stanley Investment Management.

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