Rupiah Forwards Gain a Second Day as Debt Auction Oversubscribed

Indonesia’s rupiah forwards strengthened for a second day after a government debt auction attracted bids for 2.3 times the amount on offer.

The Finance Ministry sold 8.5 trillion rupiah ($870 million) of bonds yesterday with maturities ranging from one to 15 years, a statement on its website shows. Global funds held 272 trillion rupiah of local-currency sovereign notes on Jan. 28, the most since Jan. 4, official data show. The central bank stepped up intervention in the currency market to reduce the disparity between onshore and offshore rates, Hendar, executive director for monetary policy, said Jan. 28.

“The bond auction will revive fund inflows as the oversubscription shows there is still good interest in the country’s debt,” said Nurul Eti Nurbaeti, Jakarta-based head of treasury research at PT Bank Negara Indonesia. “The gap between the rupiah’s onshore and offshore levels will narrow as the central bank keeps intervening.”

One-month non-deliverable forwards rose 0.2 percent to 9,810 per dollar as of 3:13 p.m. in Jakarta, data compiled by Bloomberg show. That’s 0.5 percent cheaper than the spot rate, which fell 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 9,790 today by the Association of Banks in Singapore.

Bank Indonesia is aware of “issues” regarding the fixing set by the association in Singapore and is in talks with policy makers in Southeast Asia on how to manage them, spokesman Difi Johansyah said by phone from Jakarta yesterday, after Bank Negara Malaysia required local lenders to use onshore quotes to settle the ringgit’s derivative contracts.

The spot rate in the rupiah weakened 1.3 percent in January, while the forwards advanced 0.1 percent.

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 yield on the 5.625 percent sovereign bonds due May 2023 climbed two basis points, or 0.02 percentage point, to 5.26 percent, the highest level since Jan. 15, according to prices from the Inter Dealer Market Association.

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