Rupiah forwards advanced by the most in more than a week as Japan announced a 10.3 trillion yen ($116 billion) stimulus program, improving Indonesia’s export outlook. Government bonds were little changed.
The spending will boost gross domestic product in Japan, Indonesia’s second-largest overseas market, by around 2 percentage points, the government said in a statement released today in Tokyo. Indonesia’s current-account deficit will probably narrow this quarter, from an estimated record 2.3 percent of GDP in the last three months of 2012, as exports improve, Perry Warjiyo, assistant governor at the central bank, said yesterday. The country will hold elections in 2014.
“The fiscal stimulus should support Japanese growth, and will likely help demand for imports from the region,” said Prakriti Sofat, a regional economist at Barclays Plc in Singapore. “We expect rupiah underperformance to increase over the medium-term as a larger political-risk premium is priced in against the backdrop of a structural current-account deficit and the risk of a nationalistic policy bias.”
One-month non-deliverable forwards advanced 0.4 percent, the most since Jan. 2, to 9,947 per dollar as of 9:35 a.m. in Jakarta, data compiled by Bloomberg show. The contracts fell 1.3 percent this week. They are at a 2.9 percent discount to the spot rate, which was steady at 9,661 today and this week, prices from local banks compiled by Bloomberg show. Non-deliverable forwards are settled in dollars.
U.S. Trade Representative Ron Kirk requested talks with Indonesia over “trade-restrictive measures” yesterday, after the government reinstated a 5 percent tax on soybean imports on Jan. 1.
The rupiah’s one-month implied volatility, a measure of expected moves in exchange rates used to price options rose 25 basis points, or 0.25 percentage point, to 6.75 percent, the highest level since Sept. 27. It has advanced 1.05 percentage points this week.
The yield on the government’s 5.625 percent bonds due May 2023 was little changed at 5.23 percent today, prices from the Inter Dealer Market Association shows. It increased 11 basis points this week.
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