Indonesia’s rupiah forwards fell to the weakest level in three years and government bonds declined on concern the government’s failure to meet its spending target will hamper economic growth and damp demand for local assets.
Contracts to buy the currency in a month fell for a fifth day as global funds pulled 340 billion rupiah ($35 million) from local-currency sovereign notes on Jan. 7, finance ministry data show. Gross domestic product would have expanded 6.4 percent to 6.5 percent last year, instead of the estimated 6.3 percent, if the expenditure goal was met, Bambang Brodjonegoro, head of fiscal policy at the finance ministry, said Jan. 7. Public spending was 1,482 trillion rupiah, short of the 1,548 trillion rupiah target, he said.
One-month non-deliverable forwards fell 0.2 percent to 9,890 per dollar as of 3:34 p.m. in Jakarta, the weakest level since Sept. 16, 2009, data compiled by Bloomberg show. That is 1 percent cheaper than the spot rate, which slid 1.3 percent to 9,795, prices from local banks compiled by Bloomberg show. Non-deliverable forwards are settled in dollars.
“The rupiah may test the 9,900 level this month but not exceed it,” said Bayu Kurniawan, a foreign-exchange trader at PT Bank Ekonomi Raharja in Jakarta, a unit of HSBC Holdings Plc, referring to the spot rate. “Lower spending will impact growth going forward and also investor sentiment.”
The rupiah’s one-month implied volatility, a measure of expected moves in exchange rates used to price options, was steady at 5.5 percent, the lowest level since Dec. 18.
The yield on the government’s 5.625 percent notes due May 2023 climbed three basis points, or 0.03 percentage point, to 5.11 percent, the biggest advance since Nov. 26, prices from the Inter Dealer Market Association show.