Bloomberg News

Rupiah Forwards Drop to Lowest Since June After Failed Auction

August 29, 2012

Indonesia’s rupiah forwards dropped to the lowest level in almost three months and the currency declined after a government debt auction failed to meet its target.

The contracts fell for a fourth day after the Finance Ministry sold 3.84 trillion rupiah ($401 million) of securities yesterday, short of its 6 trillion-rupiah goal, with investors bidding for 1.4 times the amount offered, a statement on the debt management office’s website shows. That compares with the previous five sales where the amounts sold exceeded targets and investors bid for an average of 3 times the amount offered.

“The result was below target and bids were disappointing, adding to negative sentiment for Indonesia,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at PT Bank Negara Indonesia. “The forwards reflect market expectations that the rupiah will weaken due to the widening current-account deficit, which will limit the supply of dollars.”

Twelve-month non-deliverable forwards declined 0.4 percent to 10,209 per dollar as of 3:24 p.m. in Jakarta, the weakest level since June 1, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

The rupiah fell 0.2 percent to 9,568 per dollar, according to prices from local banks compiled by Bloomberg. The currency reached 9,578 earlier, the lowest level since May 31. One-month implied volatility, which measures exchange-rate swings used to price options, climbed 25 basis points, or 0.25 percentage point, to 7.25 percent.

The yield on the government’s 7 percent bonds due May 2022 rose four basis points, or 0.04 percentage point, to 6.21 percent, the highest level since June 28, according to 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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