Rupiah Weakens as Overseas Investors Sell Assets, S&P Cuts Italy’s Rating
Indonesia’s rupiah weakened below 9,000 per dollar for the first time since February and government bonds fell as overseas investors sold the nation's assets amid concern Europe's debt crisis is worsening.
The currency dropped to as low as 9,060 before recouping losses to trade unchanged at 8,893 as of 4:59 p.m. in Jakarta, according to data compiled by Bloomberg. The yield on the benchmark 10-year government bond climbed seven basis points to its highest close since July 26.
Bonds fell after Standard & Poor's cut Italy's credit rating, fanning concern contagion from Greece's fiscal crisis is spreading and spurring an exodus from emerging-market assets. Bank Indonesia Deputy Governor Hartadi Sarwono said Sept. 14 the central bank intervened in the rupiah and bond markets to curb losses after the currency fell as much as 2.6 percent that day.
“Italy’s credit-rating downgrade has triggered another selloff,” said Han Hao Li, an economist at Forecast Pte in Singapore. “The rupiah seems quite fragile and that is why we are seeing Bank Indonesia frequently coming into the market” to curb declines, he said.
S&P cut Italy by one step to A, saying the country’s net government debt is the highest among A rated sovereigns, sending the MSCI Asia-Pacific Index of shares lower for a second day.
The yield on Indonesia's benchmark government 8.25 percent securities due July 2021 climbed seven basis points to 7.19 percent at the close of trading, according to prices from the Inter-Dealer Market Association. A basis point is 0.01 percentage point.
Overseas investors cut holdings of Indonesian government bonds by 4.5 percent this month to 236.9 trillion rupiah ($26.5 billion) as of Sept. 16, debt management office data show. Foreign funds sold $352 million more Indonesian shares than they bought so far this month, according to exchange data.
To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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