Rupiah Declines Most in Three Weeks on Export Growth; Bonds Rise

Indonesia’s rupiah declined the most in three weeks on concern exports will increase less than estimated this year. Government bonds rose for a second day.

The nation may see little to no growth in overseas sales this year as the debt crisis in Europe damps global demand, compared with the 12 percent increase projected at the start of the year, Vice Minister of Trade Bayu Krisnamurthi said yesterday. Overseas sales contracted for a second month in May by 8.5 percent, the most since September 2009. The World Bank lowered its growth forecast to 6 percent this year, from the 6.1 percent predicted in April, according to a report today.

“Growth is certainly a concern for the rupiah,” said Artanavaro Gasali, the head of global markets at PT Bank ICBC Indonesia in Jakarta. “Our exports will continue to be hit by the ongoing debt crisis and the global slowdown.”

The rupiah weakened 0.7 percent to 9,488 per dollar as of 3:38 p.m. in Jakarta, the most since June 19, according to prices from local banks compiled by Bloomberg. The currency touched 9,501 earlier, the weakest level since June 28. One-month implied volatility, which measures exchange-rate swings used to price options, held at 8.25 percent.

The central bank kept its benchmark interest rate at 5.75 percent as predicted by all 20 analysts surveyed by Bloomberg, it said in a statement today. Bank of Korea unexpectedly reduced borrowing costs today, the first time in more than three years.

“Bank Indonesia is unlikely to cut rates soon,” said Gasali. “Inflation will see upward pressure in the coming months due to the school holiday and ahead of the Eid al-Fitr” holidays, he said.

The yield on the government’s 7 percent bonds due May 2022 dropped one basis point, or 0.01 percentage point, to 6.08 percent, the lowest since July 6, according to prices from the Inter Dealer Market Association.

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