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Rupiah Falls to Four-Month Low on Fuel, Finance Minister Concern

May 16 (Bloomberg) -- Indonesia’s rupiah fell to a four-month low and government bonds declined on speculation uncertainty about the nation’s next finance minister and a plan to cut fuel subsidies is shaking investor confidence.

The government still hasn’t announced a permanent replacement for Agus Martowardojo, since Coordinating Minister for the Economy Hatta Rajasa took over as acting minister on April 19. President Susilo Bambang Yudhoyono said on April 30 that a proposed increase in fuel prices would be conditional on parliament approving a compensation package for the poor, which still hasn’t been released. Global funds sold $115 million more local stocks than they bought this week through yesterday, exchange data show.

The rupiah fell 0.6 percent to 9,810 per dollar, the weakest level since Jan. 10, as of 3:25 p.m. in Jakarta, prices from local banks compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 10 basis points to 6.28 percent.

“Without decisions on the new finance minister and fuel policy, the rupiah will continue to be depressed as investors want certainty,” said Nurul Eti Nurbaeti, head of treasury research at state-owned PT Bank Negara Indonesia in Jakarta. “There was some disappointment over the current-account data yesterday.”

The shortfall in the broadest measure of trade narrowed to $5.27 billion in the three months through March, compared with a deficit of $7.65 billion in the previous quarter and a $3.1 billion shortfall in the same period last year, central bank data released yesterday show.

The yield on Indonesia’s bonds maturing in May 2023 rose one basis point, or 0.01 percentage point, to 5.54 percent, the highest since May 7, according to prices from the Inter Dealer Market Association. The rate has increased nine basis points this week.

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

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