Rupiah Implied Volatility Falls to Four-Year Low on Intervention

Expectations for swings in Indonesia’s rupiah fell to a four-year low as the central bank intervened to stabilize the currency. Government bonds advanced.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 20 basis points, or 0.2 percentage point, to 4.50 percent. That’s the least since August 2008. The rupiah reversed earlier losses to gain 0.1 percent to 9,628 per dollar as of 5:28 p.m. in Jakarta, prices from local banks compiled by Bloomberg show.

The local currency’s movement last month was in line with the central bank’s policy to stabilize it, the monetary authority said in a Nov. 8 statement posted on its website. The rupiah has weakened 5.9 percent against the dollar this year, the second-worst performance among the 11 most-traded Asian currencies, according to data compiled by Bloomberg. Bank Indonesia’s international reserves increased for a fourth month to $110.3 billion in October, central bank figures show.

“Price fluctuations in the rupiah have been limited due to central bank intervention, despite its continued weakening trend,” said Raditya Ariwibowo, a research analyst in the treasury division at PT Bank Negara Indonesia in Jakarta. “Rising foreign reserves give the central bank more ammunition.”

The yield on the government’s 7 percent bonds due May 2022 dropped one basis point, or 0.01 percentage point, to 5.42 percent, according to closing prices from the Inter Dealer Market Association.