Rupiah Forwards in Best Week Since October on Current Account

Indonesia’s rupiah forwards rose this week by the most since October on optimism the nation’s current-account deficit narrowed after foreign reserves climbed to the highest since May. Stocks advanced today.

The central bank held its reference rate at 7.5 percent for a second month, as the shortfall in the broadest measure of trade was probably less than 3 percent of gross domestic product last quarter, Governor Agus Martowardojo said yesterday. That compares with a gap of 3.8 percent in the third quarter. Foreign-currency reserves will likely be above $100 billion this month, after rising to $99.4 billion in December, Bank Indonesia Deputy Governor Perry Warjiyo said today.

“The foreign reserves show that there’s been some improvement in the balance of payments,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “It’s possible for the current-account deficit to” decline as improving global growth boosts exports, he said.

The rupiah’s one-month non-deliverable forwards gained 1.1 percent this week to 12,087 per dollar as of 4:07 p.m. in Jakarta, the most since the five days ended Oct. 25, data compiled by Bloomberg show. The contracts traded 0.6 percent stronger than the onshore rate, which rose 0.1 percent since Jan. 3 to 12,162 per dollar, prices from local banks show. The spot price and the offshore contracts climbed 0.2 percent today.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 55 basis points this week to 14.28 percent. A fixing used to settle the forwards was set at 12,033 per dollar today by the Association of Banks in Singapore, from 12,144 on Jan. 3.

Stocks Rally

The Jakarta Composite Index of shares surged 1.3 percent today to 4,254.971, the biggest gain since Dec. 30, and ended little changed for the week. Lenders led gains with PT Bank Mandiri, largest by assets, advancing 5.8 percent and PT Bank Rakyat Indonesia rising 3.8 percent.

Indonesia matched South Korea’s record 1998 dollar debt offering, raising $4 billion from a global bond sale this week with investors submitting bids amounting to $17.5 billion, according to the finance ministry.

The government’s 8.375 percent rupiah notes due in March 2024 gained this week, pushing the yield down by 19 basis points, or 0.19 percentage point, to 8.75 percent, according to the Inter Dealer Market Association.

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