Rupiah Drops as Exporters Buy Dollars After Yesterday’s Rally

Indonesia’s rupiah added to this month’s loss on speculation exporters took advantage of yesterday’s biggest rally in three weeks to buy dollars at a more favorable exchange rate.

The local currency, which advanced 0.6 percent yesterday, declined as European Union leaders kick off a meeting in Brussels today to discuss ways to tackle the region’s escalating debt crisis. Overseas investors trimmed holdings of Indonesian stocks in June amid concern demand for exports will slow as global economic growth cools.

“Demand for the dollar has piled up,” said Taufan Tito, a Jakarta-based foreign-exchange dealer at PT Bank Rakyat Indonesia. “There are many investors and corporates queuing up to buy the dollar.”

The rupiah weakened 0.6 percent to 9,502 per dollar as of 3:35 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency is poised for its biggest quarterly loss since the first three months of 2009, declining 3.7 percent.

One-month implied volatility, which measures exchange-rate swings used to price options, held at 8.5 percent and was down from 17.5 percent at the end of last month.

Global funds sold $231 million more of the nation’s shares than they bought in June, according to stock exchange data.

The yield on the government’s 7 percent bonds due May 2022 fell four basis points, or 0.04 percentage point, to 6.23 percent, according to prices from the Inter Dealer Market Association. It has declined 28 basis points this month.

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