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Rupiah Forwards Extend Drop on Current-Account Gap; Bonds Fall

Indonesia’s rupiah forwards declined for a fifth day on concern the nation’s current-account gap will deepen as President Susilo Bambang Yudhoyono called for more spending on infrastructure. Government bonds fell.

The current-account deficit more than doubled to $6.9 billion in the second quarter from $3.2 billion in the previous three months, the central bank said Aug. 10. Southeast Asia’s largest economy needs to increase investment as exports falter and use its fiscal policy to drive growth, Yudhoyono said in a speech today to lawmakers in Jakarta before his annual state budget address this evening. The rupiah rose after foreign funds bought $33 million more local shares than they sold in the first three days of the week, exchange data show.

Concern about the current-account shortfall “is still in the background,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore.

Twelve-month non-deliverable forwards fell 0.2 percent to 10,094 per dollar as of 3:59 p.m. in Jakarta, a 5.9 percent discount to the spot rate, data compiled by Bloomberg showed. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

The rupiah rose 0.1 percent to 9,503 per dollar, according to prices from local banks compiled by Bloomberg. The currency reached 9,533 yesterday, the weakest level since July 27. It has declined 4.6 percent this year, the second-worst performance among Asia’s 11 most-active currencies. One-month implied volatility, which measures exchange-rate swings used to price options, rose 150 basis points, or 1.5 percentage points, to 7.5 percent. The rate was unchanged from last week.

Bonds Drop

“We need to support national efforts to accelerate infrastructure development to ensure sustainable growth,” Yudhoyono said.

Economic expansion may reach 6.2 percent to 6.3 percent this year, compared with 6.46 percent in in 2011, central bank Governor Darmin Nasution said today. The current-account deficit may improve to 2.2 percent of gross domestic product by year-end from 3.1 percent in the second quarter, he said.

Local financial markets will be shut tomorrow for the Independence Day holiday and from Aug. 20 through Aug. 22 for the Muslim festival of Eid al-Fitr.

The yield on the government’s 6.25 percent bonds due April 2017 climbed four basis points to 5.58 percent, according to prices from the Inter Dealer Market Association. The yield has increased 17 basis points this week after Bank Indonesia raised the minimum rate for the deposit facility by 25 basis points to 4 percent effective Aug. 13.

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