Indonesia’s bonds fell, pushing the 10-year yield to the highest level since February 2011, on concern the weakening rupiah will spur inflation.
Global funds pulled 3.5 trillion rupiah ($298 million) from local-currency government notes in the two weeks through Sept. 5, finance ministry data show. The rupiah dropped 11 percent this quarter, the worst performance among 24 emerging-market currencies tracked by Bloomberg. A decline of 10 percent adds as much as 0.8 percent to inflation, according to PT Bank Central Asia, which revised its year-end forecast for consumer-price gains to 9.4 percent from 8.3 percent.
“Many industry associations haven’t increased prices in response to the rupiah yet,” said David Sumual, the Jakarta-based chief economist at Bank Central Asia, the country’s largest lender by market value. “So we may see that contribute to inflation in September or October.”
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