Bloomberg News

Rupiah Set for Third Weekly Decline on Inflation; Bonds Drop

April 27, 2012

Indonesia’s rupiah was poised for a third weekly decline and bonds fell as a plan to limit the sale of subsidized fuel threatened to stoke inflation.

The government is ready to start restricting sales of subsidized fuel in May, President Susilo Bambang Yudhoyono said yesterday. Bank Indonesia predicts consumer prices will rise 4.7 percent this year if gasoline sales are limited, Perry Warjiyo, director for economic and monetary-policy research, said April 23. Standard & Poor’s kept Indonesia’s credit rating at one level below investment grade this week, citing “policy slippages” such as the failure to reduce energy subsidies.

“The rupiah’s weakness this week is driven by inflation concern and the S&P decision,” said Taufan Tito, a Jakarta- based foreign-exchange dealer at PT Bank Rakyat Indonesia. “Inflation has shown signs of picking up, even before the fuel policy is implemented.”

The rupiah dropped 0.1 percent this week to 9,189 per dollar as of 4:05 p.m. in Jakarta, extending its monthly loss to 0.3 percent, according to prices from local banks compiled by Bloomberg. The currency advanced 0.1 percent today.

One-month implied volatility, which measures exchange-rate swings used to price options, fell 75 basis points, or 0.75 percentage point, this week to 5.75 percent, the lowest level since August. It was unchanged today.

Consumer-price gains accelerated for the first time in seven months to 3.97 percent in March, compared with 3.56 percent in February, official data show.

The yield on the government’s 7 percent bonds due May 2022 climbed four basis points this week to 5.92 percent, according to data compiled by Bloomberg. The rate increased two basis points today.

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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