Bloomberg News

Rupiah Forwards Fall to Three-Month Low on Trade Deficit Concern

August 29, 2012

Indonesia’s rupiah forwards dropped to the lowest level in almost three months and the currency traded near the weakest level since May on speculation the nation’s trade deficit is widening.

Global funds sold $29.3 million more local stocks than they bought yesterday, as the Jakarta Composite Index dropped by the most in more than five weeks, exchange data show. The Finance Ministry failed to reach its target in a debt auction this week, following five sales that sold more bonds than projected. The nation probably recorded a trade deficit of $1.5 billion in July, compared with $1.3 billion the previous month, according to a Bloomberg survey ahead of data due Sept. 3.

“The trade deficit continues to be a concern, and we expect to see another next month,” said Billie Fuliangsahar, the head of treasury at PT Rabobank International Indonesia in Jakarta. “I don’t expect the rupiah to go past the 9,600 level as the central bank will continue to support the currency.”

Twelve-month non-deliverable forwards weakened 0.3 percent to 10,215 per dollar as of 8:57 a.m. in Jakarta, the lowest level since June 1, according to data compiled by Bloomberg. The contracts are headed for the biggest monthly decline since May, dropping 3 percent in August and 4.8 percent this year. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

The rupiah, this year’s worst performer among Asia’s most- traded currencies, dropped 5.6 percent in 2012 and is poised for a seventh month of declines, weakening 1.4 percent in August, prices from local banks compiled by Bloomberg show. The currency dropped 0.2 percent today to 9,575 per dollar and touched 9,590 earlier, the weakest level since May 31.

One-month implied volatility, which measures exchange-rate swings used to price options, was steady at 7.25 percent. The gauge fell 5.95 percentage points this year.

The yield on the government’s 7 percent bonds due May 2022 was little changed at 6.29 percent, the highest level since June 20, according to the Inter Dealer Market Association. The notes are poised for the biggest monthly drop since January 2011, pushing the yield up 59 basis points, or 0.59 percentage point.

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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