Rupiah Forwards Drop Most in a Week as Dollar Supply Declines

Indonesia’s rupiah forwards dropped the most in a week on speculation exporters held back from repatriating overseas income to boost profits on odds of further exchange-rate declines.

Dollar supply in domestic markets has dwindled because exporters aren’t converting earnings, Bank Indonesia Governor Darmin Nasution said on Jan. 11. The central bank will respond to “out of proportion” concern over the current-account deficit, estimated to have been 2.3 percent of gross domestic product last quarter, he said. Global funds cut holdings of local sovereign debt by 2 trillion rupiah ($206 million) this month to 268.53 trillion rupiah on Jan. 14, the lowest level since November, finance ministry data show.

The rupiah’s one-month non-deliverable forwards fell 0.1 percent to 9,900 per dollar as of 2:01 p.m. in Jakarta, data compiled by Bloomberg show. That’s 1.9 percent weaker than the spot rate, which slid 0.6 percent to 9,710, prices from local banks compiled by Bloomberg show. A daily fixing used to settle non-deliverable forward contracts was set at 9,865 today by the Association of Banks in Singapore. The rupiah lost 0.7 percent this month, after dropping in each of the last three quarters.

“The rupiah’s story remains the same in that dollar supply onshore is limited,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “There is still interest in Indonesia but investors are beginning to hedge their investments in case of further currency declines and any difficulty in exiting the market.”

The currency’s one-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 6.75 percent, the highest level since September.

The yield on the government’s 5.625 percent notes due May 2023 was little changed at 5.26 percent, the lowest level since Jan. 11, according to prices from the Inter Dealer Market Association.