Bloomberg News

Rupiah Drops to Seven-Week Low After 2012 Growth Forecast Cut

November 16, 2011

Nov. 16 (Bloomberg) -- Indonesia’s rupiah touched a seven- week low after the central bank cut its 2012 growth forecast yesterday on concern the slowing global economy will hurt exports. Bonds declined.

Bank Indonesia estimates gross domestic product will increase 6.5 percent next year from a previous estimate of 6.7 percent. The central bank unexpectedly cut its benchmark interest rate by 50 basis points to 6 percent last week amid concern Europe’s debt crisis was worsening. The MSCI Asia- Pacific Index of regional shares dropped after Italy’s 10-year yield rose above 7 percent yesterday, while Spain and Belgium sold less than the targeted amount at auctions.

“Bank Indonesia has already revised its growth target as Europe’s debt crisis is dragging on,” said Bambang Eko Joewono, the Jakarta-based head of the global-markets division at PT Bank UOB Indonesia. “There are concerns about Indonesian exports slowing.”

The rupiah fell 0.1 percent to 9,005 per dollar as of 4:36 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It dropped as much as 0.6 percent earlier to 9,053, the weakest level since Sept. 26. The central bank said in October it has sufficient foreign-exchange reserves to protect the currency.

“The central bank will probably come in to defend the rupiah at 9,050,” Joewono said.

Indonesia sold $1 billion of Islamic bonds due 2018 this week at a yield of 4 percent, less than half the rate at which it sold its debut dollar sukuk in 2009. The rate on the seven- year sukuk was at 4 percent today, according to Royal Bank of Scotland Group Plc prices.

The yield on the government’s benchmark 8.25 percent bonds due July 2021 increased four basis points, or 0.04 percentage points, to 6.29 percent, according to prices from the Inter- Dealer Market Association.

--Editors: Andrew Janes, Sandy Hendry

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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