Indonesia’s rupiah forwards fell to the weakest level in three years and government bonds dropped on concern the widening current-account deficit will damp capital inflows. Stocks declined as the rupiah touched a three-year low.
Offshore funds pulled 360 billion rupiah ($37 million) from local-currency sovereign notes in the first two days of this week, finance ministry data show. Bank Indonesia held its policy rate at a record low of 5.75 percent for an 11th month today, as predicted by all 22 analysts surveyed by Bloomberg. The nation’s current-account deficit may widen to 2.4 percent of gross domestic product in 2012, the largest in data going back to 1998, the central bank said on Dec. 11.
One-month non-deliverable forwards dropped 0.8 percent to 9,950 per dollar as of 4:21 p.m. in Jakarta, the lowest level since Sept. 15, 2009, data compiled by Bloomberg show. That’s a 2.9 percent discount to the spot rate, which was unchanged at 9,660 after touching a three-year low of 9,880 earlier, prices from local banks compiled by Bloomberg show. Non-deliverable forwards are settled in dollars.
“The forwards move is in line with the onshore market and it’s possible the spot rate will move toward that level,” said Gundy Cahyadi, a Singapore-based economist at Oversea-Chinese Banking Corp. “Weakening in the rupiah will persist in the near term as investor sentiment in Indonesia has turned bearish.”
One-month implied volatility in the rupiah, a measure of expected moves in exchange rates used to price options, rose 1.38 percentage points to 6.88 percent.
The benchmark Jakarta Composite index of shares slid 1 percent to 4,317.365, the biggest drop since Sept. 26. The yield on the government’s 5.625 percent bonds due May 2023 rose eight basis points, or 0.08 percentage point, to 5.20 percent, the biggest climb since Aug. 27, closing prices from the Inter Dealer Market Association show.
“The drop in stocks seems to be due to the rupiah,” said John Teja, the head of equities sales at PT Ciptadana Securities in Jakarta. “The market no longer has a positive catalyst that can drive share prices higher.”
Indonesia’s foreign-exchange reserves rose for a sixth month to $112.8 billion in December, the highest level since April, according to data from Bank Indonesia.
“The clear message coming from the central bank is that it is happy to see the currency soften,” Robert-Prior Wandesforde, an economist at Credit Suisse Group AG in Singapore, wrote in a note today.