Indonesian Rupiah Falls to Three-Year Low on Current-Account Gap

Dec. 21 (Bloomberg) -- Indonesia’s rupiah fell to the weakest level since September 2009 as concern the current-account deficit will widen prompted investors to pull money from the nation’s assets.

Overseas funds sold 2.15 trillion rupiah ($219 million) more local-currency sovereign debt than they bought in the three days through Dec. 19, poised for the biggest weekly outflow since August, finance ministry data show. The current-account shortfall may widen to 2.3 percent of gross domestic product this quarter, the most since Bloomberg began compiling the figures in 1997, the central bank said on Dec. 11.

“We expect the rupiah to remain an underperformer in the region,” said Prakriti Sofat, a regional economist at Barclays Plc in Singapore. “The overall balance-of-payments position remains weak, which continues to weigh on the rupiah.”

The rupiah dropped 0.3 percent to 9,679 per dollar as of 3:32 p.m. in Jakarta, after reaching 9,785 earlier, the lowest level since Sept. 16, 2009, according to prices from local banks compiled by Bloomberg. The currency lost 6.3 percent this year, the worst performance among Asia’s 10 most-traded currencies excluding the yen. The rupiah will weaken to 9,900 in 12 months, Sofat predicted.

Indonesia posted a current-account deficit of 2.14 percent of GDP for the three months through September, its third quarterly shortfall in a row, central bank data show. Foreign funds have sold $36 million more local stocks than they bought this month, according to figures from the exchange.

Bank Indonesia

Bank Indonesia intervened shortly after trading opened today, according to two traders who asked not to be identified, as the currency posted a weekly decline of 0.4 percent. The central bank will remain in the market to guard the rupiah, Governor Darmin Nasution said last week.

One-month implied volatility in the currency, a measure of expected moves in exchange rates used to price options, was steady at 5.7 percent today and this week. It was 13.2 percent at the end of 2011.

The yield on the government’s 7 percent notes due in May 2022 fell seven basis points, or 0.07 percentage point, this week to 5.17 percent, prices from the Inter Dealer Market Association show.

To contact the reporter on this story: Yudith Ho in Jakarta at yho35@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net