Rupiah rises to 8-week high

ASIAN CURRENCIES ROUND-UP

The Indonesian rupiah rose to an eight-week high against the dollar on speculation investors will buy higher-yielding assets. Bonds gained.

The currency extended this month's advance to 2.7 percent as the government may spend more money on infrastructure such as roads and ports, helping to boost the nation's economic growth.

The Jakarta Post reported today that Indonesia plans to build a 94 trillion rupiah ($10.3 billion) bridge to link the islands of Java and Sumatra.

"Macro considerations to continue to support growth will probably be an overriding factor'' for the rupiah, said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. The dollar ``is expected to be on a southward path'' against Asian currencies, he said.

The currency rose to 9,118 per dollar, its strongest since July 26, before trading at 9,130 at 4:15 p.m. in Jakarta, from 9,170 on September 21, according to data compiled by Bloomberg.

The rupiah may advance to 8,900 by year-end, Ng said. The nation's benchmark Jakarta Composite index of shares gained 0.8 percent today after surging 4.9 percent last week, the largest weekly gain since Aug. 24. The economy accelerated in the three months ended June, growing 6.3 percent, the fastest in more than two years, as exports rose.

The U.S. Federal Reserve's interest-rate reduction last week could ``in the near term provide knee-jerk support for the likes of the Indonesian rupiah due to a pick-up in portfolio inflows,'' Callum Henderson, Singapore-based head of currency strategy at Standard Chartered Bank Plc, wrote in September 21 note.

Standard Chartered cut its year-end forecast for the dollar against the rupiah to 9,100 from a previous prediction of 9,300, citing the prospects for more Fed rate cuts.

Bank Indonesia
Local bonds advanced on speculation the government will allow the currency to strengthen to contain rising prices. Bank Indonesia Deputy Governor Aslim Tadjuddin said last week that the rupiah's appreciation will slow inflation.

``The outlook is quite positive,'' said Edwin Syahruzad, co-head of capital markets at PT Danareska Securities in Jakarta.

``The government can tackle the inflation problem such that inflation can be maintained within the territory that is comfortable from an investor perspective. I see yields for the long end coming down.''

Consumer prices rose 6.5 percent in August from a year earlier, following a 6.1 percent gain in July, the Central Statistics Bureau said on Sept. 3. Bank Indonesia expects inflation of between 5 percent and 7 percent this year.

The yield on the 10 percent government note due in July 2017 fell 3 basis points to 9.15 percent, according to the Inter Dealer Market Association in Jakarta. The price rose 0.173, or 1,730 rupiah per 1 million rupiah face amount, to 105.391. A basis point is 0.01 percentage point.