Rupiah Forwards Rally Most in Three Weeks on U.S. Debt Progress

Indonesia’s rupiah forwards gained the most in three weeks after U.S. lawmakers said they had constructive talks on raising the debt ceiling, reducing the chance of a default and improving global risk sentiment.

President Barack Obama pledged to keep speaking with House Republicans to end the partial government shutdown and raise the debt limit before an Oct. 17 deadline to prevent non-payment on state borrowings. Indonesia’s current-account deficit at 2.5 percent to 2.7 percent of gross domestic product in 2014 would be “acceptable,” compared with 4.4 percent last quarter, Senior Deputy Governor Mirza Adityaswara said yesterday.

“Asian currencies across the board are rising as the U.S. debt ceiling discussion moves forward,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. (MAY) in Singapore. “Longer-term strengthening in the rupiah will be data-dependent, with all eyes on the external balance.”

One-month non-deliverable forwards on the rupiah rose 1.4 percent to 11,125 per dollar as of 9:22 a.m. in Jakarta, the biggest gain since Sept. 19, data compiled by Bloomberg show. The offshore contracts gained 1.6 percent this week and were 3 percent stronger than the spot rate, which advanced 0.2 percent today and 0.4 percent this week to 11,473 per dollar, according to prices from local banks.

A fixing used to settle the forwards was set at 11,222 per dollar yesterday, according to the Association of Banks in Singapore. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose five basis points, or 0.05 percentage point, today to 15.6 percent, data compiled by Bloomberg show.

Hedging Rules

Bank Indonesia set guidelines for individuals and companies, including state-owned firms, to hedge against currency swings, it said in an Oct. 9 statement. The rules are aimed at helping stabilize the rupiah, it said.

“We will see more impact on the volatility starting next month as local companies take out hedges,” Supaat said.

The yield on the government’s 5.625 percent bonds due May 2023 fell one basis point to 8.03 percent today, the lowest level since Sept. 24, prices from the Inter Dealer Market Association show. The yield dropped eight basis points this week.

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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