Rupiah Heads for Third Monthly Loss on Fuel Policy; Bonds Steady

Indonesia’s rupiah headed for a third monthly loss before a government report forecast to show consumer-price gains quickened in April and on concern fuel-policy changes will stoke inflation. Bonds were steady.

The nation is ready to begin limiting subsidized gasoline sales in May after lawmakers rejected the government’s bid to increase the cost of the commodity last month, President Susilo Bambang Yudhoyono said April 26. Bank Indonesia predicts consumer prices will rise 4.7 percent this year if sales are restricted, Perry Warjiyo, director for economic and monetary-policy research, said last week. Standard & Poor’s refrained from awarding Indonesia with investment-grade status on April 23, citing “policy slippages.”

“The rupiah remains fragile,” said Artanavaro Gasali, the Jakarta-based head of global markets at PT Bank ICBC Indonesia. “The government’s fuel-policy plan and implementation are still unclear. Concern comes down to the effect on inflation.”

The rupiah declined 0.1 percent this month to 9,174 per dollar as of 4:08 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency has lost 1.2 percent this year and rose 0.1 percent today.

One-month implied volatility, which measures exchange-rate swings used to price options, fell 230 basis points, or 2.30 percentage points, in April to 5.50 percent, the lowest level since August. The measure lost 25 basis points today.

A government report tomorrow will show consumer-price gains accelerated for a second month to 4.46 percent in April, compared with 3.97 percent in March, according to the median estimate of 17 economists surveyed by Bloomberg. That would be the biggest increase since September.

The yield on the government’s 7 percent bonds due May 2022 added one basis point this month to 5.95 percent, according to final prices from the Inter Dealer Market Association. The yield climbed three basis points today.

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