Rupiah Forwards at Lowest Since 2009 on Fuel Subsidy Concern

Indonesia’s rupiah forwards fell to the lowest since September 2009 on concern a delay in raising fuel prices will spur energy imports, worsening the nation’s current-account deficit.

One-month non-deliverable forwards slipped 0.9 percent to 10,084 per dollar as of 4:24 p.m. in Jakarta, according to data compiled by Bloomberg. They touched 10,086, the weakest since Sept. 8, 2009. The contracts were down 3.2 percent for the month, the most since May 2012. They traded at a 2.9 percent discount to the spot rate, which was up 0.1 percent for the day and down 0.7 percent for the month at 9,795.

The government wants to cushion the poor from energy costs by providing compensation, Energy and Mineral Resources Minister Jero Wacik said yesterday, adding that this needs parliamentary consultation. On May 22, the authorities said gasoline prices will rise by 2,000 rupiah ($0.20) from June. The shortfall in Indonesia’s current account, the broadest measure of trade, was $5.27 billion in the first three months of the year, the sixth consecutive quarterly deficit.

“People aren’t very convinced the government will be able to raise fuel prices,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “They’re also very concerned what the impact of this will be on the current-account deficit.”

Central Bank

Indonesia’s central bank intervened in the currency market on May 29 and will continue to do so when needed to guard the exchange rate at a level that reflects economic fundamentals, Governor Agus Martowardojo said yesterday.

One-month implied volatility in the rupiah, a measure of expected exchange-rate swings used to price options, rose 3.08 percentage points from April 30 to 8.63 percent. It climbed 1.04 percentage points today and 1.77 percentage points this week.

The yield on the 5.625 percent bonds maturing in May 2023 increased 48 basis points this month, the most since August, to 5.98 percent, according to prices from the Inter Dealer Market Association. It rose 19 basis points this week and was little changed today.