Indonesian finance minister Basri Sees Rupiah Back to 2009 Levels After QE Taper
November 9, 2013 Leave a comment
Basri Sees Rupiah Back to 2009 Levels After QE Taper
By Bloomberg on 5:10 pm November 8, 2013.
Chatib Basri said the rupiah and bond yields will return to levels seen in 2009 after the Federal Reserve cuts stimulus that has buoyed emerging-market assets. (GA Photo/Defrizal)
Indonesia’s rupiah and bond yields will return to levels seen in 2009 after the Federal Reserve cuts stimulus that has buoyed emerging-market assets, Finance Minister Chatib Basri said. The currency traded at an average of 10,396 per dollar in 2009, compared with 11,408 as of 1:15 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg.The yield on benchmark 10-year government securities averaged 11.15 percent in 2009, and was 7.93 percent today, data compiled by Bloomberg show.
“The normal world is a world without quantitative easing,” Basri said in an interview with Bloomberg TV Indonesia in Jakarta today. “I see that after the QE taper, we will return to that situation.”
The US central bank will start reducing its $85 billion a month of bond purchases in March, according to an Oct. 17-18 survey by Bloomberg. Global funds pulled Rp 19.98 trillion ($1.8 billion) from Indonesian local-currency government debt in June after the Fed signaled in May that it was considering tapering.
That rupiah has weakened 16 percent against the dollar this year, while the 10-year bond yield rose 2.74 percentage points. Consumer prices increased 8.3 percent in October, official data show.
Inflation will ease to 5.5 percent in 2014, according to state budget assumptions.
“Much depends on the inflation outlook and investor confidence, so it won’t be exactly the same as 2009, which was also a post-crisis environment,” said Gundy Cahyadi, an economist at DBS Group Holdings in Singapore.
“What we saw in May was a test run for what will happen when the Fed does taper, and we see from then that the government and Bank Indonesia understand what’s needed and are making the right preparations.”
Bloomberg
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