Rupiah in Longest Losing Streak Since January 2004; Bonds Rally

Indonesia’s rupiah fell for a 10th day, the longest losing streak since January 2004, after the central bank said it allowed the currency to weaken.

The rupiah touched the lowest level since September 2009 today and has lost 0.9 percent since July 11, the day before Bank Indonesia Deputy Governor Perry Warjiyo said the monetary authority has supplied dollars to the market over the past two to three months and allowed the currency to gradually decline, especially this month. Citigroup Inc. raised its 2014 current-account deficit forecast for Indonesia as the outlook for commodity prices dims and the Chinese economy slows, according to a research note yesterday.

“Bank Indonesia has done its job well in maintaining currency stability, while letting it gradually weaken,” said Mika Martumpal, head of treasury research and strategy at PT Bank CIMB Niaga in Jakarta. “Weaker regional growth will continue to pressure the external balance and subsequently the rupiah.”

The rupiah dropped 0.2 percent to 10,063 per dollar as of 10:15 a.m. in Jakarta, prices from local banks show. The currency has declined 5.8 percent in the past 12 months. One-month non-deliverable forwards were steady at 10,420, trading at a 3.4 percent discount to the spot rate.

The rupiah at 10,000 per dollar is not a cause for concern as it is in line with economic fundamentals, Bank Indonesia Governor Agus Martowardojo said yesterday.

Bonds Rally

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 74 basis points to 13.29 percent, according to data compiled by Bloomberg.

Indonesia’s current-account shortfall will be 2.2 percent of gross domestic product in 2014, according to Citigroup Jakarta-based economist Helmi Arman, compared with the lender’s previous estimate of 1.8 percent. The deficit was 2.8 percent last year and 3 percent in the first quarter of 2013, official data show.

The yield on the government’s 5.625 percent bonds due May 2023 fell five basis points, or 0.05 percentage point, to 8.16 percent, 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

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