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Rupiah in Biggest Weekly Drop Since December on Current Account

Indonesia’s rupiah completed its biggest weekly decline since December as investors awaited more clues about the shape of the next government amid concern the nation’s current-account deficit will widen.

Redward Associates Ltd., an Auckland-based research company, said this week it sees the shortfall in the broadest measure of trade increasing to $8.8 billion this quarter, from $4.02 billion in the last three months of 2013. Jakarta Governor Joko Widodo, the presidential frontrunner known locally as Jokowi, said yesterday he had narrowed his choice for running mate in the July 9 election to two or three people, declining to give further details.

The rupiah declined 1.3 percent this week to close at 11,565 per dollar, the biggest drop since the five days ended Dec. 13, according to prices from local banks. The currency strengthened 0.3 percent today, after touching a seven-week low of 11,658 on April 23.

“The rupiah is on track to weaken, but it’s unlikely to go beyond 12,000 again,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “The market wants to see who Jokowi will partner with and their stance on the economy, their policies and how they plan to rebalance the economy.”

Indonesia’s relatively high bond yields will support the currency, Koji Fukaya, chief executive officer and foreign-exchange strategist at FPG Securities Co. in Tokyo, said in an interview yesterday.

Bank Indonesia sees the current-account deficit at more than $4 billion in the first quarter, Governor Agus Martowardojo said April 17. The data are due May 9.

Forwards, Bonds

One-month non-deliverable forwards lost 1.3 percent from April 18 to 11,595, 0.3 percent weaker than the onshore rate, according to data compiled by Bloomberg. The contracts gained 0.5 percent today. Bank Indonesia set a fixing used to settle the forwards at 11,601 today, from 11,418 on April 17.

One-month implied volatility, a measure of expected swings in the currency used to price options, fell eight basis points, or 0.08 percentage point, this week to 11.07 percent.

The yield on the government’s 8.375 percent bonds due March 2024 was little changed from April 18 at 7.95 percent, after falling 10 basis points today, according to the Inter Dealer Market Association.

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