Indonesia’s rupiah declined the most in almost two weeks on speculation dollar demand will exceed supply as local companies prepare to pay dividends in foreign currencies. Government bonds fell.
PT Indika Energy will make a $19 million payment to overseas shareholders and the country’s second-largest power-station coal producer PT Adaro Energy will provide $117 million, according to company statements. Global funds pulled 70 billion rupiah ($7.1 million) from Indonesian bonds last week, the first reduction since the five days ended April 5, official data show.
“Banks are already collecting dollars in expectation of demand from companies preparing to pay dividends,” said Fahrudin Haris Prastowo, a foreign-exchange trader at PT Bank Rakyat Indonesia. “The rupiah will be under pressure until it strengthens again in July when the demand eases.”
The local currency fell 0.4 percent to 9,830 per dollar as of 9:28 a.m. in Jakarta, the biggest drop since May 16, according to prices from local banks compiled by Bloomberg. That is the lowest level since May 17, when the rupiah reached 9,845, the weakest since Jan. 10.
The spot rate traded at a 0.7 percent premium to its one-month non-deliverable forwards, which declined 0.2 percent to 9,901, data compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 26 basis points, or 0.26 percentage point, to 6.86 percent.
“Bank Indonesia continues to be present in the market to monitor and maintain the rupiah’s stability,” Prastowo said.
The yield on government notes due May 2023 rose one basis point to 5.87 percent, the highest level since Oct. 11, prices from the Inter Dealer Market Association show.