Rupiah Forwards Gain Most in Two Weeks on Central Bank Statement

Indonesia’s rupiah forwards gained by the most in more than a week after the central bank said it sold dollars to boost onshore supply of the greenback and improve investor confidence.

Bank Indonesia stepped up intervention to help narrow the gap between the onshore and offshore exchange rates, Hendar, executive director for monetary policy at the central bank, said in an interview yesterday. Global funds added 1.2 trillion rupiah ($123 million) to their local-currency government debt holdings last week, the most since the five days ended Dec. 7, finance ministry data show.

“Bank Indonesia’s assurance reduces the perceived foreign exchange risk for investors as it demonstrates its commitment to keep the rupiah at a stable and relatively strong level,” said Mika Martumpal, a currency analyst at PT Bank CIMB Niaga in Jakarta. “Foreign inflows will continue as long as the global situation remains supportive.”

One-month non-deliverable forwards gained 0.5 percent to 9,818 per dollar as of 3:13 p.m. in Jakarta, the most since Jan. 21, according to data compiled by Bloomberg. That’s 0.6 percent cheaper than the spot rate, which weakened 0.9 percent to 9,760, prices from local banks compiled by Bloomberg show. A daily fixing used to settle the derivative contracts was set at 9,816 today by the Association of Banks in Singapore.

Bank Indonesia is aware of “issues” regarding the fixing set by the Association and is discussing with policy makers in Southeast Asia on how to manage them, spokesman Difi Johansyah said by phone from Jakarta today, after the Monetary Authority of Singapore said reviews over the quotes are ongoing, according to a Dec. 20 statement.

Debt Sale

The central bank sees room to adjust foreign-exchange rules to temper excess dollar demand and stabilize the rupiah, said Hendar, without elaborating.

“This is in line with our effort to not have a dual foreign-exchange market,” he said, referring to the increase in dollar supply. “We are leaning toward seeing a narrower gap between the rupiah’s onshore and offshore levels.”

One-month implied volatility in the rupiah, which measures expected moves in exchange rates used to price options, was unchanged at 6.25 percent, the least since Jan. 9.

The Finance Ministry plans to sell 7 trillion rupiah of debt maturing in one to 15 years today, according to a statement on its website. The yield on the 5.625 percent sovereign notes due May 2023 climbed two basis points, or 0.02 percentage point, to 5.22 percent, the highest level since Jan. 22, prices from the Inter Dealer Market Association show.

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