Bloomberg News

Rupiah Falls Most Since May as Exports Damp Growth; Bonds Drop

July 12, 2012

Indonesia’s rupiah had its biggest weekly drop since May and government bonds declined as exports contracted and the central bank cut its growth forecast.

The economy will expand 6.1 percent to 6.5 percent this year, compared with a previous estimate of 6.3 percent to 6.7 percent, Bank Indonesia said in a statement yesterday, after it kept its reference rate at 5.75 percent. Indonesia may see little to no export growth this year, after May’s overseas sales contracted by 8.5 percent, the most since September 2009, Vice Minister of Trade Bayu Krisnamurthi said on July 11.

“Weakening exports are definitely a concern because our foreign-exchange reserves would go down and our supply of dollars will decrease,” said Bayu Kurniawan, a currency trader at PT Bank Ekonomi Raharja in Jakarta. “There will be a slowdown in growth as driven by external factors, but it should remain reasonable.”

The rupiah fell 1 percent this week to 9,501 per dollar as of 9:11 a.m. in Jakarta, the biggest loss since the five days ended May 25, according to prices from local banks compiled by Bloomberg. The currency was little changed today. One-month implied volatility, which measures exchange-rate swings used to price options, held at 8.25 percent.

The World Bank predicts the Indonesia economy may expand 6 percent this year, compared with its 6.1 percent estimate in April, it said in a report yesterday. ING Financial Markets forecasts Bank Indonesia will cut its reference rate by 25 basis points, or 0.25 percentage point, before the end of the year, Tim Condon, chief Asia economist in Singapore, wrote in a report released today.

The government’s benchmark 10-year bonds snapped seven weeks of gains, pushing the yield up four basis points this week to 6.10 percent, data compiled by Bloomberg show. The yield climbed one basis point today.

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

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


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