Rupiah Forwards Reach Lowest Since January on Fuel-Subsidy Talks

Indonesia’s rupiah forwards fell to the weakest level since January after overseas investors sold the nation’s assets on concern about the government’s plan to adjust fuel subsidies. Two-year sovereign bonds advanced.

Foreign holdings of local-currency debt fell 1.6 trillion rupiah ($164 million) to 283.3 trillion rupiah as of March 22, compared with a record 284.9 trillion rupiah on March 14, according to government data. Finance Minister Agus Martowardojo said last week that measures to manage fuel usage are being considered and price increases haven’t been ruled out.

“The longer the delay and as the uncertainty remains, the higher the chance that inflation will have picked up already, and prices tend to be sticky and not move downward,” said Eugene Leow, an economist at DBS Group Holdings Ltd. in Singapore. “It would be better to have a clearer direction of where the policy is headed.”

Rupiah one-month non-deliverable forwards weakened 0.2 percent to 9,811 per dollar as of 9:42 a.m. in Jakarta, data compiled by Bloomberg show. They reached 9,825 earlier, the lowest level since Jan. 31. The contracts traded at a 0.6 percent discount to the spot rate, which declined 0.1 percent to 9,745, prices from local banks show.

Bond Sale

A daily fixing used to settle the derivatives was set at 9,741 yesterday by the Association of Banks in Singapore, compared with 9,750 on March 22. 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, climbed five basis points, or 0.05 percentage point, to 5.85 percent.

Foreign investors sold $98 million more Indonesian shares than they bought yesterday, exchange data show, even as the Jakarta Composite Index climbed 1.2 percent, the biggest increase in more than two weeks. It gained 0.8 percent today.

Consumer prices rose 5.31 percent last month, the most since June 2011, driven by food and electricity costs. March data are due on April 1.

The Finance Ministry is due to sell 7 trillion rupiah of debt today with maturities ranging from one to 20 years. The yield on the 11 percent notes due in October 2014 dropped one basis point to 4.29 percent, the lowest level since March 11, prices from the Inter Dealer Market Association show. The rate on the 5.625 percent bonds due May 2023 was little changed at 5.47 percent.

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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