Rupiah Set for Biggest Weekly Drop Since November on Deficit

Indonesia’s rupiah headed for its biggest weekly drop since November as investors wait for more clues about the shape of the next government amid concern the current-account deficit will widen.

Redward Associates Ltd., an Auckland-based research company, said this week it sees the shortfall in the broadest measure of trade increasing to $8.8 billion this quarter, from $4.02 billion in the last three months of 2013. Jakarta Governor Joko Widodo, the presidential frontrunner known locally as Jokowi, said yesterday he had narrowed his choice for running mate in the July 9 election to two or three people, declining to give further details.

The rupiah declined 1.5 percent this week to 11,595 per dollar as of 9:51 a.m. in Jakarta, the biggest drop since the five days ended Nov. 29, prices from local banks show. The currency strengthened 0.1 percent today after touching a seven-week low of 11,658 on April 23.

“The rupiah is on track to weaken, but it’s unlikely to go beyond 12,000 again,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “The market wants to see who Jokowi will partner with and their stance on the economy, their policies and how they plan to rebalance the economy.”

Indonesia’s relatively high bond yields will support the currency, Koji Fukaya, chief executive officer and foreign-exchange strategist at FPG Securities Co. in Tokyo, said in an interview yesterday.

Bank Indonesia sees the current-account deficit at more than $4 billion in the first quarter, Governor Agus Martowardojo said April 17. The data is due May 9.

Forwards, Bonds

One-month non-deliverable forwards lost 1.6 percent from April 18 to 11,640, 0.4 percent weaker than the onshore rate, according to data compiled by Bloomberg. The contracts gained 0.1 percent today. Bank Indonesia set a fixing used to settle the forwards at 11,601 per dollar today, compared with 11,418 on April 17.

One-month implied volatility, a measure of expected swings in the currency used to price options, fell 19 basis points, or 0.19 percentage point, this week to 10.95 percent.

The government’s 8.375 percent bonds due March 2024 fell for a second week. The yield climbed five basis points from April 18 to 8 percent, according to the Inter Dealer Market Association. It fell five basis points today.

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

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net Andrew Janes, Anil Varma

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