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Rupiah Steady on Term Deposits Seeing Low Demand; Bonds Advance

Indonesia’s rupiah was steady after demand for the central bank’s dollar term deposits, which are aimed at supporting the local currency, fell short of market expectations. Government bonds advanced.

Bank Indonesia accepted $700 million of seven- and 14-day deposits yesterday at 0.17 percent and 0.18 percent, it said in a statement, compared with rates in the U.S. of 0.22 percent for one week and 0.23 percent for 15 days. The measure was predicted to provide an avenue for lenders to bring back an estimated $2 billion a day on average that is now being kept in overseas banks and reduce volatility in the local currency, Deputy Governor Halim Alamsyah said May 29.

“Demand was not too strong,” said Klara Pramesti, a research analyst in the treasury division at PT Bank Negara Indonesia in Jakarta. “Investors still tend to seek safe havens so whatever instruments we introduce will not see much effect until global conditions stabilize.”

The rupiah traded at 9,421 per dollar as of 4:50 p.m. in Jakarta, having closed at 9,420 yesterday, after earlier touching an almost one-week low of 9,480, according to prices from local banks compiled by Bloomberg. One-month implied volatility, which measures exchange-rate swings used to price options, lost 50 basis points, or 0.5 percentage point, to 12 percent.

Bank Indonesia continues to focus on stabilizing the rupiah and will push for increasing foreign-currency supply in the market to keep the rupiah in line with regional currencies, it said in a statement on June 12.

DBS Group Holdings Ltd. lowered its forecast for the currency to 9,800 for the third quarter, from 9,200 previously because of Europe’s debt crisis, analysts led by David Carbon wrote in a research report today.

The yield on the government’s 7 percent bonds due May 2022 dropped one basis point, or 0.01 percentage point, to 6.43 percent, the lowest since May 15, according to prices from the Inter Dealer Market Association.

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