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Rupiah Drops After Global Funds Pare Indonesian Asset Holdings

Indonesia’s rupiah weakened after international investors cut holdings of the nation’s assets, boosting demand for dollars to repatriate money.

Global funds reduced ownership of local government debt by 6.87 trillion rupiah ($728 million) in the past month, according to data from the Ministry of Finance. The rupiah has slumped 2.9 percent this quarter, prompting the central bank to say this week it may unveil further measures to ease volatility after pledging last month that it will start offering term deposits in the U.S. currency.

“Investors are selling Indonesia’s assets and repatriating funds, weighing on the rupiah,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “On top of that, there has been strong corporate demand for the dollar. There is a possibility the Bank Indonesia will introduce some regulations to help halt declines in the rupiah.”

The rupiah slumped 1.5 percent to 9,438 per dollar as of 3:04 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency reached 9,643 on May 31, the weakest level since October 2009. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 125 basis points, or 1.25 percentage point, to 12.75 percent.

Global investors sold $157 million more of Indonesia’s equities than they bought this month through yesterday, exchange data show.

The yield on the government’s 7 percent bonds due May 2022 fell seven basis points, or 0.07 percentage point, to 6.48 percent, according to the Inter Dealer Market Association.

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