Rupiah Forwards Reach One-Month High on Commodity Price Gains

Indonesia’s rupiah forwards climbed to the strongest level in a month on optimism rising commodity prices will boost the nation’s export earnings and help narrow the trade deficit.

The Commodity Research Bureau’s BLS Spot Index for all commodities reached 487.44 on Jan. 18, the highest level since Oct. 18. Indonesia is the world’s biggest exporter of tin and palm oil. The nation’s trade balance remained in deficit for a second month in November as overseas shipments fell for an eighth month, official data show. The central bank will unveil measures to boost the exchange rate to between 9,400 per dollar and 9,600, Investor Daily Indonesia reported yesterday, citing Governor Darmin Nasution.

“Commodity prices are positively correlated with the trade balance, where a narrowing deficit will support the rupiah,” said Mika Martumpal, a currency analyst at PT Bank CIMB Niaga in Jakarta. “Bank Indonesia’s pledge to support the exchange rate also lends good sentiment.”

The currency’s one-month non-deliverable forwards rose 0.3 percent to 9,758 per dollar as of 3:20 p.m. in Jakarta, after reaching 9,748 earlier, the strongest level since Dec. 20, data compiled by Bloomberg show. That’s 1 percent weaker than the spot rate, which fell 0.5 percent to 9,663, prices from local banks compiled by Bloomberg show.

The rupiah’s one-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped 25 basis points, or 0.25 percentage point, to 6.5 percent. A daily fixing used to settle the derivative contracts was set at 9,761 today by the Association of Banks in Singapore.

The yield on the 5.625 percent government bonds due May 2023 lost one basis point to 5.24 percent, the lowest since Jan. 10, according to prices from the Inter Dealer Market Association.

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