Rupiah Strengthens as Trade Gap Seen Narrowing; Bonds Decline

Indonesia’s rupiah gained by the most in more than a week as the trade shortfall is forecast to have narrowed last month, easing concern there is a lack of dollars in the local market. Government bonds declined.

November’s trade deficit will be $342 million, compared with $1.5 billion in October, a Bloomberg survey shows before data due Jan. 2. As the gap shrinks, the pressure on the rupiah will lessen, Bank Indonesia Governor Darmin Nasution said today. Financial markets will be closed on Dec. 31 and Jan. 1.

“It seems demand for dollars is sufficiently met,” said Wiwig Santoso, the Jakarta-based head of treasury and markets at PT DBS Bank Indonesia, the local unit of Southeast Asia’s largest lender.

The rupiah strengthened 0.3 percent today to 9,638 per dollar as of 5:02 p.m. in Jakarta, the most since Dec. 18, prices from local banks compiled by Bloomberg show. It advanced 0.2 percent this week. The rupiah is the worst-performing currency this year among Asia’s 10 most-active excluding the yen, falling 5.9 percent.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, was steady at 5.7 percent today and this week, from 13.2 percent at the end of last year. It is poised for the biggest annual drop since 2009.

The yield on the government’s 7 percent bonds due May 2022 climbed one basis point, or 0.01 percentage point, to 5.20 percent today, closing prices from the Inter Dealer Market Association show. The yield rose two basis points this week and fell 90 basis points, or 0.9 percentage point, in 2012, declining for a fourth year.

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

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