Rupiah advances on global stock rally; bonds gain

ASIAN CURRENCIES ROUND-UP

Indonesia's rupiah advanced, snapping a two-day decline, as regional shares rallied.

The rupiah was among five of the 10 most-traded Asian currencies to gain as equities followed the US higher. The Japanese yen strengthened today after its biggest loss in almost three years yesterday against the dollar as investors sold higher-yielding assets bought with loans from Japan.

``It's interesting that the Asian currencies aren't strengthening more,'' said Thomas Harr, a Singapore-based senior foreign-exchange strategist at Standard Chartered Plc. ``We had quite a strong rally in US equities yesterday and a weakening in the yen.''

The rupiah climbed 0.1 per cent to 9,420 against the dollar as of 4:30 pm in Jakarta, according to data compiled by Bloomberg. The currency has still declined 2.2 per cent this month as weakness stemming from the US subprime loans prompted investors to cut holdings of emerging-market assets.

The rupiah may strengthen to 9,300 by year-end, Standard Chartered's Harr said, after revising his estimate from 9,200 because of the recent market turmoil.

Bank Indonesia will keep its benchmark interest rate unchanged at 8.25 per cent until the market volatility subsides, the central bank's Senior Deputy Governor Miranda Goeltom said yesterday. Goeltom also said the central bank is concerned about the volatility and has supported the rupiah in the market.

The currency advanced as the Jakarta Composite Index gained as much as 1.8 per cent today, ending a two-day decline.

Government bonds gained for the sixth time in seven trading days.

The yield on the 10 per cent note maturing in July 2017 declined 2 basis points to 9.68 per cent, according to the Inter Dealer Market Association. The price rose 0.132, or 1,320 rupiah per 1 million rupiah face amount, to 101.978. A basis point is 0.01 percentage point.

Investors are demanding 5.17 percentage points of extra yield to hold Indonesian 10-year bonds instead of similar- maturity US Treasuries. The difference in yield narrowed from about 5.38 percentage points a week ago.

Robby Jiaw, head of capital markets in Jakarta at PT Bank Permata, said the central bank has intervened in Indonesia's capital markets, helping bond prices increase.

``The central bank keeps checking the level of bonds just to send signals that they are in the market. I sense that they are buying in the market,'' said Jiaw. This sends ``quite a good'' message to investors.