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Rupiah Weakest Since May on Trade Deficit Concern; Bonds Decline

Indonesia’s rupiah reached the weakest level in three months and government bonds declined on speculation the nation’s trade deficit is widening.

Global funds sold $29.3 million more local stocks than they bought yesterday and withdrew 820 billion rupiah ($86 million) from debt holdings this week through yesterday, exchange and finance ministry data show. Indonesia failed to reach its target in a bond auction this week, after five sales that sold more bonds than projected. The nation likely recorded a trade deficit of $1.5 billion in July, compared with $1.3 billion the previous month, according to a Bloomberg survey ahead of data due Sept. 3.

“The trade deficit continues to be a concern, and we expect to see another next month,” said Billie Fuliangsahar, the head of treasury at PT Rabobank International Indonesia in Jakarta. “I don’t expect the rupiah to go past the 9,600 level as the central bank will continue to support the currency.”

The rupiah, this year’s worst performer among Asia’s most-traded currencies, dropped 5.6 percent in 2012 and is poised for a seventh month of declines, weakening 1.4 percent in August, prices from local banks compiled by Bloomberg show. The currency dropped 0.2 percent today to 9,573 per dollar as of 5:39 p.m. in Jakarta and touched 9,590, the weakest level since May 31.

One-month implied volatility, which measures exchange-rate swings used to price options, was steady at 7.25 percent. The gauge fell 5.95 percentage points this year.

The yield on Indonesia’s 7 percent bonds due May 2022 climbed seven basis points, or 0.07 percentage point, to 6.29 percent, the highest level since June 20, according to closing prices from the Inter Dealer Market Association. The notes are poised for the biggest monthly drop for 10-year government notes since January 2011, pushing the yield up 58 basis points, or 0.58 percentage point.

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