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Rupiah Declines This Month by Most Since December on Deficit

Indonesia’s rupiah declined this month by the most since December on signs the current-account deficit will widen as investors wait for clues about the shape of the next government.

Presidential frontrunner Joko Widodo’s party didn’t win enough support at the April 9 legislative election to nominate him without needing to form a coalition and hasn’t yet announced who his running mate will be. The shortfall in the nation’s broadest measure of trade was probably 2.2 percent to 2.4 percent of gross domestic product last quarter, from 1.98 percent in the last three months of 2013, according to PT Mandiri Sekuritas. The data are due May 9.

The rupiah weakened 1.7 percent this month to close at 11,562 per dollar, prices from local banks show. In the offshore market, one-month non-deliverable forwards slid 2.3 percent in April to 11,602 per dollar, trading 0.3 percent weaker than the onshore rate, data compiled by Bloomberg show. The contracts declined 0.2 percent today and the spot rate fell 0.1 percent. Local financial markets will be closed tomorrow for a public holiday.

“Political uncertainty and upcoming economic data are causing investors to wait and see, in addition to seasonal income repatriation,” said Leo Rinaldy, a Jakarta-based economist at Mandiri Sekuritas, a unit of the nation’s largest lender by assets. “Rising dollar demand for imports ahead of Ramadan may weigh on the rupiah.”

The Muslim fasting month will start in late June this year. Indonesia’s presidential election will be held July 9.

Rupiah Assumption

Bank Indonesia set a fixing used to settle the forwards at 11,532 per dollar today, compared with 11,404 on March 28 and 11,589 yesterday. One-month implied volatility, a measure of expected swings in the exchange rate used to price options, climbed 41 basis points, or 0.41 percentage point, this month to 11.09 percent.

The nation will revise its rupiah assumption in this year’s budget from the current 10,500 per dollar average, Vice Finance Minister Bambang Brodjonegoro said in Jakarta today. The exchange-rate has averaged 11,735 so far in 2014, data compiled by Bloomberg show. The assumption for next year’s budget will probably be in the 11,500 to 12,000 range, Finance Minister Chatib Basri said today.

The government’s 8.375 percent bonds due March 2024 headed for a third straight month of gains. The yield fell three basis points in April to 7.96 percent, according to the Inter Dealer Market Association. The yield climbed three basis points today.

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