Rupiah Forwards in Best Week Since October on Current Account

Indonesia’s rupiah forwards rose this week by the most since October on optimism the nation’s current-account deficit narrowed after foreign reserves climbed to the highest since May.

The central bank held its reference rate at 7.5 percent for a second month, as the shortfall in the broadest measure of trade was probably less than 3 percent of gross domestic product last quarter, Governor Agus Martowardojo said yesterday. That compares with a gap of 3.8 percent in the previous period and a record 4.4 percent in the second quarter. Foreign-currency reserves rose to $99.4 billion in December, from $97 billion the previous month, according to Bank Indonesia.

“The foreign reserves show that there’s been some improvement in the balance of payments,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “It’s possible for the current-account deficit to” decline as improving global growth boosts exports, he said.

The rupiah’s one-month non-deliverable forwards gained 0.8 percent this week to 12,125 per dollar as of 9:14 a.m. in Jakarta, the most since the five days ended Oct. 25, data compiled by Bloomberg show. The contracts traded 0.6 percent stronger than the onshore rate, which fell 0.2 percent since Jan. 3 to 12,193 per dollar, prices from local banks show. The spot price was little changed today, while the offshore contracts declined 0.1 percent.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 49 basis points this week to 14.34 percent. A fixing used to settle the forwards was set at 12,104 per dollar yesterday by the Association of Banks in Singapore, from 12,144 on Jan. 3.

Dollar Bond

Indonesia matched South Korea’s record 1998 dollar debt offering, raising $4 billion from a global bond sale this week with investors submitting bids amounting to $17.5 billion, according to the finance ministry.

The government’s 8.375 percent rupiah notes due in March 2024 gained this week, pushing the yield down by 10 basis points, or 0.1 percentage point, to 8.83 percent, according to the Inter Dealer Market Association.

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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