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Rupiah Falls Most Since June as Exports Damp Growth; Bonds Drop

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July 13 (Bloomberg) -- Indonesia’s rupiah halted a two-week gain and government bonds declined as exports contracted and the central bank cut economic growth forecasts.

The economy will expand 6.1 percent to 6.5 percent this year, compared with a previous estimate of 6.3 percent to 6.7 percent, Bank Indonesia said in a statement yesterday, after it kept its reference rate at 5.75 percent. Indonesia may see little to no export growth this year, after May’s overseas sales contracted by 8.5 percent, the most since September 2009, Vice Minister of Trade Bayu Krisnamurthi said on July 11.

“Weakening exports are definitely a concern because our foreign-exchange reserves would go down and our supply of dollars will decrease,” said Bayu Kurniawan, a currency trader at PT Bank Ekonomi Raharja in Jakarta. “There will be a slowdown in growth as driven by external factors, but it should remain reasonable.”

The rupiah fell 0.5 percent this week to 9,448 per dollar as of 4:22 p.m. in Jakarta, the biggest loss since the five days ended June 22, according to prices from local banks compiled by Bloomberg. The currency gained 0.5 percent today. One-month implied volatility, which measures exchange-rate swings used to price options, held at 8.25 percent.

The World Bank predicts the Indonesian economy may expand 6 percent this year, compared with its 6.1 percent estimate in April, it said in a report yesterday. ING Financial Markets forecasts Bank Indonesia will cut its reference rate by 25 basis points, or 0.25 percentage point, before the end of the year, Tim Condon, chief Asia economist in Singapore, wrote in a report released today.

The government’s benchmark 7 percent bonds due May 2022 declined for a second week, pushing the yield up two basis points to 6.07 percent, according to closing prices from the Inter Dealer Market Association. The yield dropped one basis point today.

To contact the reporter on this story: Yudith Ho in Jakarta at yho35@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net