Rupiah gains most since October as Bank Indonesia sees stability

[JAKARTA] Indonesia's rupiah rallied the most since October after the central bank said it expects the currency to be more stable next year.

Domestic factors are pointing to a "more positive tone" on the currency while a clear policy direction by the Federal Reserve will support markets, Bank Indonesia Deputy Governor Perry Warjiyo said in an interview on Friday. The rupiah has climbed 0.7 per cent in December, the most in Asia excluding Japan, and a gauge of expected swings in the currency has dropped for four straight weeks in the longest stretch since July.

"We see potential for further currency strength, but it will depend on the domestic economic growth and commodity prices," said Trian Fatria, a treasury research analyst at PT Bank Negara Indonesia in Jakarta. "There are signs of more stability." The rupiah climbed 1.2 per cent to 13,745 a dollar as of 11:45 a.m. in Jakarta, poised for its biggest advance since Oct 9, according to prices from local banks. That pared its 2015 decline to 9.9 per cent, the steepest in Asia's after Malaysia's ringgit. The Jakarta Composite Index of shares rose 0.1 per cent on Monday.

Indonesia's foreign-exchange reserves have fallen for nine months through November and overseas investors hold 38 per cent of its local-currency sovereign bonds, leaving the country susceptible to outflows as the Fed raises interest rates and China's economy slows.

The yield on Indonesia's two-year government bonds dropped seven basis points to 8.56 per cent, the lowest level since Dec 11, according to the Inter Dealer Market Association. The 10- year yield rose two basis points to 8.72 per cent.

BLOOMBERG