Rupiah Snaps 4-Day Gain as U.S. Debt Impasse Unsettles Markets

Indonesia’s rupiah retreated from a seven-year high as the U.S. debt impasse fueled concern that global economic growth will slow, cooling demand for emerging- market assets.

The currency snapped a four-day advance as the MSCI Asia- Pacific Index of stocks slid by the most in more than two weeks. House Speaker John Boehner revised his plan to raise the U.S. debt ceiling, gaining support among fellow Republicans for a proposal which Senate Democrats said they won’t vote for, as the Aug. 2 deadline looms. Standard & Poor’s said last week an increase that didn’t address long-term budget deficits would risk a downgrade of its U.S. debt rating.

“Increased concern about the impasse in U.S. debt negotiations has seen a bit of risk-taking taken off the table,” said Nick Verdi, a Singapore-based currency strategist at Barclays Capital. “There’s nervousness as we move toward the deadline. Markets are uncertain as to what the impact of a U.S. downgrade would be.”

The rupiah weakened 0.1 percent to 8,493 per dollar as of 4:11 p.m. in Jakarta, according to data compiled by Bloomberg. It touched 8,476 yesterday, the highest level since March 2004.

The U.S. may lose its top-level AAA ranking if officials fail to resolve the stalemate, Moody’s Investors Service, Standard & Poor’s and Fitch Ratings said. The nation was the third largest buyer of Indonesian non-oil exports in May, according to figures from the central statistics office.

Indonesia’s 10-year government bonds rose for a third day. The yield on the 8.25 percent note due July 2021 fell 3 basis points, or 0.03 percentage point, to 7.05 percent, according to closing prices from the Inter-Dealer Market Association.

To contact the reporter on this story: Suryani Omar in Jakarta at somar6@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.