Rupiah Forwards Approach Three-Year Low as Record-Low Rate Held

Indonesia’s rupiah forwards dropped toward a three-year low after the central bank kept borrowing costs at a record low and predicted the current-account deficit will widen. Government bonds advanced.

Bank Indonesia held its reference rate at 5.75 percent for a 10th month yesterday, as forecast by all 21 economists surveyed by Bloomberg. The nation may see its fourth consecutive current-account shortfall this quarter at 2.3 percent of gross domestic product, which would be the largest in data going back to 1997, the central bank said in a statement yesterday. The authority will remain in the market to guard the rupiah, Governor Darmin Nasution said Dec. 10.

“Bank Indonesia gave no indication it will tighten its policy to support the external imbalance,” said Mika Martumpal, a currency analyst at PT Bank CIMB Niaga in Jakarta. “The rupiah will not move too significantly through the year-end, due to strong corporate demand for dollars, while the central bank continues to smooth out volatility.”

One-month non-deliverable forwards declined 0.7 percent to 9,750 per dollar as of 3:50 p.m. in Jakarta, after reaching 9,757 earlier, near a three-year low of 9,823 touched on Dec. 10, data compiled by Bloomberg show. The contracts to buy or sell the rupiah in 30 days traded at a 1.1 percent discount to the spot rate. Non-deliverable forwards are settled in dollars.

In the spot market, the rupiah advanced 0.3 percent to 9,635 per dollar, prices from local banks compiled by Bloomberg show. The currency reached 9,733 on Dec. 10, the weakest level since September 2009. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 25 basis points, or 0.25 percentage point, to 5.75 percent.

The yield on the government’s 7 percent securities maturing in May 2022 fell four basis points to 5.33 percent, prices from the Inter Dealer Market Association show.

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