Rupiah Falls Most in 2 Weeks as Cyprus Concerns Curb Risk-Taking

Indonesia’s rupiah fell the most in two weeks as investors favored safer bets than emerging-market assets amid concern an unprecedented levy on bank deposits in Cyprus will reignite Europe’s debt crisis.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active Asian currencies excluding the yen, sank to a five-month low after European finance ministers reached an agreement on March 16 to force depositors in Cypriot banks to share the cost of the latest bailout. Indonesia’s exchange rate can be managed through intervention, controlling the supply of foreign currency and forming an onshore spot reference, Perry Warjiyo, who was approved by lawmakers to become a deputy governor at the central bank, said on March 15.

“The rupiah is weighed by across-the-board declines in Asian currencies due to short-term risk aversion,” said Suriyanto Chang, the head of treasury at PT Bank QNB Kesawan in Jakarta. “There is huge potential that if the rupiah dips below 9,730 per dollar that the central bank may step in and try to smoothen the weakening.”

The rupiah dropped 0.2 percent to 9,723 per dollar as of 9:34 a.m. in Jakarta, prices from local banks compiled by Bloomberg show. That is the biggest decline since March 4. One- month non-deliverable forwards weakened 0.2 percent to 9,758, according to data compiled by Bloomberg.

A daily fixing used to settle the derivatives was set at 9,704 per dollar on March 15 by the Association of Banks in Singapore, compared with 9,702 the previous day. Today’s rate will be published at 11:30 a.m. in the city-state.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 38 basis points, or 0.38 percentage point, to 5.81 percent.

The yield on the government’s bonds maturing in May 2023 was steady at 5.47 percent, prices from the Inter Dealer Market Association show. The yield on notes due in 2033 lost nine basis points today to 6.24 percent, the most since Jan. 3.

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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