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Rupiah Volatility in Biggest Weekly Drop Since September on Vote

A gauge of swings in the rupiah dropped by the most in 10 months this week after Joko Widodo was declared winner of Indonesia’s presidential election.

Widodo, known as Jokowi, defeated Prabowo Subianto by 8.4 million votes, the election commission said July 22. Prabowo plans to appeal the vote count in the Constitutional Court, one of his lawyers, Didi Supriyanto, said in a July 23 interview. The plea must be submitted today. A widening current-account deficit is the main risk to the economy, central bank Governor Agus Martowardojo said July 23.

The rupiah’s one-month implied volatility, a measure of expected fluctuations used to price options, slid 216 basis points, or 2.16 percentage points, this week to close at 8.74 percent, data compiled by Bloomberg show. That’s the biggest drop since the five-day period ended Sept. 13, 2013.

“The market doubts the appeal will affect the election outcome, so that dispels much of the uncertainty,” said David Sumual, chief economist at PT Bank Central Asia, the nation’s largest lender by market value. “Most of the political news has been priced in, so the focus will turn back to the current account.”

The rupiah rose 0.3 percent from July 18 to 11,578 per dollar, prices from local banks show. It reached 11,483 on July 23, the strongest level since May 20. The currency fell 0.1 percent today, paring its monthly gain to 2.4 percent, according to data compiled by Bloomberg.

Active Opposition

Prabowo’s planned appeal is aimed at seeking revoting in five to six provinces, his brother Hashim Djojohadikusumo said in an interview today. Prabowo currently doesn’t aim to stand for presidency in 2019, even as he plans an active parliamentary opposition if the plea fails, Hashim said.

In the offshore market, one-month non-deliverable forwards climbed 0.4 percent this week to 11,623, 0.4 percent weaker than the onshore spot rate, data compiled by Bloomberg show. Bank Indonesia set a fixing used to settle the forwards at 11,591 per dollar today, compared with 11,706 on July 18.

The government’s 8.375 percent bonds due March 2024 gained for a fourth week, the longest winning streak since March. The yield dropped one basis point from July 18 to 8.04 percent, according to the Inter Dealer Market Association.

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