Rupiah Reaches Three-Year Low on Dollar Demand, Capital Outflows

Indonesia’s rupiah touched a three- year low on speculation corporate demand for dollars exceeds supply as foreign funds pull money from local assets and the current-account deficit is forecast to widen.

The shortfall in the current account may be 2.3 percent of gross domestic product this quarter, which would be the most since Bloomberg began compiling the data in 1997, the central bank said on Dec. 11. Overseas investors sold $51 million more local stocks than they bought this month and reduced their government debt holdings by 430 billion rupiah ($44 million), exchange and finance ministry data show.

“The rupiah will tend to weaken as long as the current- account deficit continues, which drives strong demand for dollars,” said Mika Martumpal, a currency analyst at PT Bank CIMB Niaga in Jakarta. “Considering the slowdown in capital inflows recently, the rupiah will stay near 9,700 through year- end.”

The rupiah fell 0.1 percent to 9,660 per dollar as of 9:01 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It declined by as much as 0.9 percent to 9,735 earlier, the weakest level since Sept. 29, 2009. The rupiah has lost 6.1 percent this year, the worst performance among Asia’s 11 most-active currencies after the Japanese yen.

Bank Indonesia will remain in the market to guard the local currency, Governor Darmin Nasution said on Dec. 10.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, was steady at 5.7 percent, compared with 13.2 percent at the end of 2011.

The yield on the government’s 7 percent notes maturing in May 2022 was little changed at 5.19 percent, the lowest level since Feb. 15, prices from the Inter Dealer Market Association show.

To contact the reporter on this story: Yudith Ho in Jakarta at yho35@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.