Rupiah Drops to Six-Week Low on Outlook for Slower Global Growth

  • Dollar advances as Fed officials argue for U.S. rate increase
  • Current-account deficit shrank last quarter, data show Friday

Indonesia’s rupiah fell to a six-week low as concern global growth is slowing and the prospect of a U.S. interest-rate increase damped demand for higher-yielding assets.

The rupiah had its biggest weekly decline in almost two months after a gauge of the dollar jumped on Thursday when two Federal Reserve officials made the case for policy tightening. Overseas investors have cut their holdings of Indonesian bonds by $313 million this month as waning demand for the nation’s exports reduced the appeal of yields among the highest in Asia.

“We’re seeing a bit of unwinding of carry trades and outflows from Indonesian assets,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. Funds are paring holdings in “high-yielding currencies largely because of waning risk appetite,” he said.

The rupiah fell 0.2 percent to 13,320 per dollar at the close of trading in Jakarta on Friday after sliding to 13,342, the weakest level since March 30, according to prices from local banks. The currency declined 0.6 percent this week.

Indonesia’s current-account deficit narrowed to $4.7 billion in the first quarter from $5.1 billion in the previous three months, the statistics department said Friday.

The Bloomberg Dollar Spot Index rose 0.1 percent after jumping 0.3 percent on Thursday when Boston Fed President Eric Rosengren said the central bank should be ready to gradually normalize rates if incoming data remain consistent. Kansas City Fed’s Esther George said current rates are “too low for today’s economic conditions.”

Indonesian 10-year bonds rose this week with the yield dropping three basis points to 7.76 percent, according to prices from the Inter Dealer Market Association.

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