Bloomberg News

Rupiah Drops Most in Two Weeks After Funds Cut Share Holdings

December 13, 2011

Dec. 13 (Bloomberg) -- Indonesia’s rupiah fell the most in two weeks after international investors cut holdings of the nation’s assets on concern Europe’s debt crisis will slow demand for exports from Asia.

Global funds sold $21 million more local stocks than they bought yesterday, exchange data show. The currency traded near a one-week low and the MSCI Asia-Pacific Index of shares declined after Moody’s Investors Service said that last week’s European summit didn’t reduce the prospect of rating downgrades for the region’s nations.

“The market is likely to be affected more by sour global sentiment surrounding Europe’s crisis,” said Enrico Tanuwidjaja, a Singapore-based currency strategist at Malayan Banking Bhd.

The rupiah dropped 0.5 percent, the most since Nov. 28, to 9,093 per dollar as of 9:30 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency reached 9,130 earlier, the weakest level since Dec. 7.

A fiscal accord by European Union leaders that added 200 billion euros ($264 billion) to their bailout fund doesn’t diminish the risk of downgrades, Moody’s Investors Service said yesterday.

Bank Indonesia expects the currency to trade between 8,900 and 9,000 next year, Deputy Governor Hartadi Sarwono told reporters in Jakarta yesterday. The monetary authority plans to boost “intervention” to support the rupiah, Governor Darmin Nasution said on Nov. 30 after it touched a 17-month low of 9,240 a day earlier.

“There is still the risk of central bank intervention,” Tanuwidjaja said. “They will do it if the rupiah gets out of whack with regional currencies.”

--Editors: Ven Ram, Andrew Janes

%IDR

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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


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