Indonesia’s rupiah weakened by the most in six months on concern the government’s failure to meet its spending target last year will hamper economic growth and damp demand for local assets.
Global funds pulled 340 billion rupiah ($35 million) from their local-currency sovereign bond holdings on Jan. 7, finance ministry data show. Gross domestic product would have expanded by 6.4 percent to 6.5 percent last year, instead of the estimated 6.3 percent, if the expenditure goal was met, Bambang Brodjonegoro, head of fiscal policy at the finance ministry, said Jan. 7. Public spending was 1,482 trillion rupiah, short of the 1,548 trillion rupiah target, he said.
The rupiah declined 0.7 percent to 9,740 per dollar as of 8:55 a.m. in Jakarta, the biggest drop since July 12, prices from local banks compiled by Bloomberg show. It touched 9,847 yesterday, the weakest level since Sept. 16, 2009.
“The rupiah may test the 9,900 level this month but not exceed it,” said Bayu Kurniawan, a foreign-exchange trader at PT Bank Ekonomi Raharja in Jakarta, a unit of HSBC Holdings Plc. “Lower spending will impact growth going forward and also investor sentiment.”
The rupiah’s one-month implied volatility, a measure of expected moves in exchange rates used to price options, was steady at 5.5 percent, the lowest level since Dec. 18.
The yield on the government’s 5.625 percent notes due May 2023 was little changed at 5.08 percent, prices from the Inter Dealer Market Association show. That’s three basis points, or 0.03 percentage point, shy of the record low of 5.05 percent reached on Feb. 9.
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