Rupiah Forwards Discount at Five-Year High on Dollar Demand

Indonesia’s rupiah forwards fell by the most in two months, widening the discount to the spot rate to the largest in nearly five years, on speculation dollar demand from importers is exceeding supply.

The nation’s trade shortfall may expand to between $5 billion and $6 billion in 2013, compared with a deficit of $1.7 billion last year, Trade Minister Gita Wirjawan said this month. Bank Indonesia will ease rules for exporters buying dollars when they show documents proving they have sold the greenback before, as part of measures meant to increase domestic foreign-currency supply, Governor Agus Martowardojo said last week.

One-month non-deliverable forwards slid 2 percent to 11,632 per dollar as of 9:45 a.m. in Jakarta, data compiled by Bloomberg show. It earlier fell 2.3 percent, the most since June 10. The contracts were 6.7 percent weaker than the spot rate, which declined 0.2 percent to 10,865, according to prices from local banks. That’s the biggest discount since November 2008.

“What’s happening to the forwards can drive expectations for the spot rate,” said Nurul Eti Nurbaeti, Jakarta-based head of treasury research at PT Bank Negara Indonesia. “Dollar demand for imports still outstrips supply, while exporters are preferring to hold on to their dollars.”

A fixing used to settle the forwards set by the Association of Banks in Singapore was 11,052 yesterday. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 147 basis points, or 1.47 percentage points, to 19.35 percent, data compiled by Bloomberg show.

The yield on government bonds due May 2023 climbed eight basis points to 8.59 percent, the highest level since March 2011, prices from the Inter Dealer Market Association show. The finance ministry plans to raise 8 trillion rupiah ($711 million) from a sovereign debt auction today.

To contact the reporter on this story: Yudith Ho in Jakarta at yho35@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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