Rupiah Touches Three-Year Low After Public Spending Goal Missed

Indonesia’s rupiah touched a three-year low after the government said its failure to reach its spending target last year crimped economic growth.

Public expenditure was 1,482 trillion rupiah ($153 billion) in 2012, short of the 1,548 trillion rupiah goal, Bambang Brodjonegoro, head of fiscal policy at the finance ministry, said yesterday. Gross domestic product probably increased 6.3 percent last year, he said, adding that it would have risen 6.4 percent to 6.5 percent if the spending target had been reached. Bank Indonesia will remain in the market to guard the rupiah, Governor Darmin Nasution said on Dec. 10.

The rupiah weakened 0.5 percent to 9,718 per dollar as of 3:11 p.m. in Jakarta, the biggest drop since Dec. 17, prices from local banks compiled by Bloomberg show. It touched 9,847 earlier, the lowest level since Sept. 16, 2009. One-month non-deliverable forwards fell 0.4 percent to 9,873, trading at a 1.6 percent discount to the spot rate, according to data compiled by Bloomberg. Non-deliverable forwards are settled in dollars.

“The offshore forwards market is one of the indicators for the rupiah, while Bank Indonesia is still present in the domestic market to guard against volatility,” said Fahrudin Haris Prastowo, a foreign-exchange trader at state-owned PT Bank Rakyat Indonesia. “Missed economic assumptions due to low public spending will impact investor sentiment.”

The rupiah’s one-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped 20 basis points, or 0.2 percentage point, to 5.5 percent.

The yield on the government’s 5.625 percent notes due May 2023 was little changed at 5.11 percent, prices from the Inter Dealer Market Association shows.

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