Indonesia’s rupiah slid to a five-year low on concern a planned ban on ore exports will weigh on the current account, after the Federal Reserve said it will cut stimulus that has buoyed emerging-market assets.
The rupiah fell 0.8 percent this week to 12,213 per dollar as of 4:31 p.m. in Jakarta, prices from local banks show. It reached 12,255 earlier, the weakest level since December 2008, and was little changed today. The currency has dropped 21 percent this year, the second-worst performance among 24 emerging-market exchange rates tracked by Bloomberg.
The government must be careful and consider the economic impact of the prohibition on raw-mineral shipments, which takes effect after Jan. 12, Energy and Mineral Resources Minister Jero Wacik said in Jakarta today. A clear plan is needed to avoid worsening pressure on the current account, which has been in deficit for the last eight quarters, the International Monetary Fund said in a report this week. The Fed will trim its monthly debt buying to $75 billion from $85 billion starting in January, Chairman Ben S. Bernanke said Dec. 18.
“The government wants to add value to exports, which is very positive, but that will take time and cause short-term pain on the external balance,” said I Made Adi Saputra, a fixed-income analyst at PT Nusantara Capital Securities in Jakarta. “The Fed taper lends more certainty to the market, which should stabilize the rupiah.”
In the offshore market, one-month non-deliverable forwards on the rupiah fell 0.5 percent today and 0.8 percent this week to 12,232 per dollar. They traded 0.2 percent weaker than the onshore spot rate.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 46 basis points this week to 15.16 percent. A fixing used to settle the forwards was set at 12,102 per dollar today, from 12,021 on Dec. 13, according to the Association of Banks in Singapore.
The yield on the nation’s 5.625 percent bonds due May 2023 fell 12 basis points from Dec. 13 to 8.44 percent, according to the Inter Dealer Market Association. The rate declined one basis point, or 0.01 percentage point, today.
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