Rupiah Reaches Weakest Level Since 2009 on Fed Tapering Concern

The rupiah reached a four-year low on rising speculation the U.S. will pare stimulus at a time when Indonesia’s current-account deficit is worsening.

The Bloomberg U.S. Dollar Index climbed for a second day before a report that may show U.S. retail sales increased for a fourth month in July, while data on manufacturing and housing starts later in the week are also forecast to improve. The nation’s current-account shortfall may be a record $9 billion in the second quarter, from $5.3 billion in the previous three months, central bank Deputy Governor Perry Warjiyo said Aug. 2.

“There is increased concern that the Federal Reserve will go ahead with its tapering plans,” said Rully Nova, an analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “The uncertainty will prompt more outflows from emerging-market currencies, especially the rupiah with its widening deficit.”

The rupiah fell as much as 0.1 percent to 10,298 per dollar, the weakest level since July 2009, and was little changed at 10,294 as of 9:51 a.m. in Jakarta, according to prices from local banks. The spot traded at a 1.5 percent premium to one-month non-deliverable forwards, which fell 0.3 percent to 10,450, data compiled by Bloomberg show.

A fixing by the Association of Banks in Singapore used to settle the derivative contracts was set at 10,288 yesterday. Local markets were closed last week for Eid al-Fitr holidays.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 22 basis points, or 0.22 percentage point, to 11.58 percent, according to data compiled by Bloomberg.

The yield on government bonds due May 2023 climbed two basis points to 7.75 percent, the highest level since July 31, data from the Inter Dealer Market Association show.

Four Federal Reserve officials indicated greater willingness last week to begin tapering the central bank’s bond-buying program that’s driven demand for emerging-market assets. Chicago Fed President Charles Evans said last week he wouldn’t rule out a decision to start scaling back asset purchases at the Sept. 17-18 gathering of the Federal Open Market Committee.

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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