Rupiah Forwards Snap Three-Day Advance as Importers Buy Dollars

Indonesia’s rupiah forwards snapped a three-day gain on speculation importers took advantage of the rally to purchase dollars at a more favorable exchange rate.

Contracts to buy the local currency in one month reached the highest level in more than four weeks yesterday. Its one-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped 25 basis points, or 0.25 percentage point, to 6.25 percent, the least in two weeks. Bank Indonesia won’t let the rupiah continue weakening, Investor Daily Indonesia reported Jan. 21, citing Governor Darmin Nasution.

“This is just a brief correction following the rally,” said Nurul Eti Nurbaeti, head of treasury research at PT Bank Negara Indonesia in Jakarta. “Many people were waiting to buy dollars at stronger rupiah levels. The market has become more stable, which gives them confidence to do so.”

The currency’s one-month non-deliverable forwards declined 0.1 percent to 9,760 per dollar as of 3:05 p.m. in Jakarta, data compiled by Bloomberg show. That’s 1.1 percent cheaper than the spot rate, which dropped 0.4 percent to 9,655, prices from local banks compiled by Bloomberg show. A daily fixing used to settle the contracts was set at 9,752 today by the Association of Banks in Singapore.

The yield on the 5.625 percent government bonds due May 2023 dropped one basis point to 5.22 percent, the lowest level since Jan. 10, according to prices from the Inter Dealer Market Association.

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