Bloomberg News

Rupiah Weakens After Funds Cut Indonesia Stock, Bond Holdings

April 16, 2012

Indonesia’s rupiah fell by the most in more than three weeks after international investors reduced holdings of the nation’s assets on concern price pressures in Southeast Asia’s biggest economy are increasing.

Global funds cut ownership of local stocks by $44 million last week and local-currency debt by 540 billion rupiah ($59 million) in the four days through April 12, according to exchange and finance ministry data. Inflation may accelerate to 6.6 percent this year from 3.97 percent last month if fuel prices are raised, Bank Indonesia Governor Darmin Nasution said on April 12. The Bloomberg-JPMorgan Asia Dollar Index fell after the cost of insuring Spain’s bonds against default surged to a record last week.

“The rupiah will likely weaken with little positive sentiment from external and internal factors,” said Rully Nova, a foreign-exchange analyst at PT Bank Himpunan Saudara in Jakarta. “Domestically, there is much uncertainty as investors want Bank Indonesia to show more action and detailed strategies to damp inflation.”

The rupiah dropped 0.5 percent, the most since March 22, to 9,189 per dollar as of 3:25 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg.

One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 6.75 percent for an eighth day.

The government will revive a plan to limit sales of subsidized fuel, Jero Wacik, energy and mineral resources minister, said on April 13.

The yield on the government’s 7 percent bonds due May 2022 rose two basis points, or 0.02 percentage point, to a three- month high of 6.05 percent, according to midday prices from the Inter-Dealer Market Association.

To contact the reporter on this story: Yudith Ho in Singapore at yho35@bloomberg.net.

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


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