Rupiah Falls Most Since August on Domestic Dollar Demand

Indonesia’s rupiah completed its biggest weekly loss since August on speculation importers stepped up dollar purchases after the Federal Reserve’s announcement of more quantitative easing drove the local currency to a seven-week high. Government bonds dropped.

The Federal Reserve announced on Sept. 13 open-ended buying of $40 billion of mortgage debt a month to hold borrowing costs down, a move that boosts the supply of dollars. The rupiah touched 9,447 versus the greenback on Sept. 17, the strongest level since Aug. 1, before retreating on each of the subsequent three days.

The rupiah fell 0.5 percent this week to 9,548 per dollar as of 4:11 p.m. in Jakarta, the most since the five days ended Aug. 31, prices from local banks compiled by Bloomberg show. The currency advanced 0.1 percent today and reached 9,609 before the Fed’s announcement on Sept. 13, the weakest level since May.

“The rupiah halted its rally as the QE effect recedes,” said Putu Andi Wijaya, a foreign-exchange dealer at PT Bank Rakyat Indonesia in Jakarta. “Corporates take any opportunity to buy dollars whenever the rupiah reaches a good level.”

The local currency’s one-month implied volatility, which measures exchange-rate swings used to price options, held at 5 percent this week, the lowest level since September 2008, data compiled by Bloomberg show.

The yield on the government’s 7 percent notes due May 2022 climbed six basis points this week, or 0.06 percentage point, to 5.96 percent, closing prices from the Inter Dealer Market Association show. The yield rose three basis points today.

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