Bloomberg News

Rupiah Drops to Two-Year Low on Speculation Greece to Exit Euro

May 15, 2012

Indonesia’s rupiah weakened to a two- year low and government bonds fell as concern over Greece’s possible exit from the euro discouraged risk-taking.

The Southeast Asian nation raised 775 billion rupiah ($84 million) from a bond auction yesterday, short of its 6 trillion rupiah target, according to the debt management office. Global funds pared 3.83 trillion rupiah from their holdings of government securities last week, finance ministry data show. Greek President Karolos Papoulias will meet with party leaders today in an attempt to form a unity government.

“Local-currency notes are still seeing selling pressure and the rupiah is weakening mostly from the impact of rising global risk, especially from problems in Europe,” said Mika Martumpal, an analyst at PT Bank CIMB Niaga in Jakarta.

The rupiah declined 0.8 percent to 9,309 per dollar, the weakest level since May 2010, as of 4:13 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, held at 8 percent, the highest since March 29.

Indonesia’s currency has a “relatively high” possibility of reaching new two-year lows, Joey Cuyegkeng, an economist at ING Groep NV in Manila, wrote in a report yesterday. “Investors are concerned about the fiscal reform slippages that would affect the longer-term prospects of the economy.”

The yield on the government’s 7 percent bonds due May 2022 rose nine basis points, or 0.09 percentage point, to 6.39 percent, the highest since Dec. 1, according to closing prices from the Inter-Dealer Market Association.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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