Rupiah Extends Losses Beyond 10,000/Dlr as Export Outlook Dims

Indonesia’s rupiah extended losses beyond 10,000 per dollar for a second day on concern demand for exports from Southeast Asia’s biggest economy will wane as regional growth slows.

The currency traded at its weakest since September 2009 and has lost 1.1 percent this month after official data July 1 showed overseas shipments contracted for a 14th consecutive month in May. Asian Development Bank joined the International Monetary Fund in lowering forecasts for developing Asia, saying the slowdown in China will hurt the regional outlook. The yield on 10-year sovereign bonds reached a two-year high.

“The risk of external imbalances remains very much alive and that could add further pressure on the currency,” Leo Rinaldy, an economist at PT Mandiri Sekuritas in Jakarta, wrote in a research note today. Global risk against the rupiah is driven by China’s economic slowdown, while the U.S. bond-tapering plan supports the dollar, he said.

The rupiah declined 0.2 percent to 10,035 per dollar as of 5:12 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. One-month non-deliverable forwards fell 1.2 percent to 10,363.

The exchange rate is in line with market conditions and economic fundamentals, Bank Indonesia Deputy Governor Perry Warjiyo said in a mobile-phone text message yesterday.

“We think Bank Indonesia has given a wider band for the rupiah to depreciate, just as we have mentioned previously, as it could not always intervene in the spot market,” Rinaldy wrote.

Dwindling Reserves

Indonesia’s foreign-exchange reserves dropped 6.7 percent to $98 billion in June, a sign the central bank has been selling dollars to support the rupiah. The holdings are the lowest since January 2011, data compiled by Bloomberg show.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased 50 basis points, or 0.50 percentage point, to 11.19 percent.

Gross domestic product in developing Asia will probably increase 6.3 percent in 2013 and 6.4 percent next year, the Manila-based ADB said in a report today. In April, it forecast expansion of 6.6 percent this year and 6.7 percent in 2014.

The IMF reduced its growth estimate for the region earlier this month to 6.9 percent from 7.2 percent.

Indonesia’s government bonds fell. The yield on the 5.625 percent notes due May 2023 climbed eight basis points to 8.3 percent, the highest level for a benchmark 10-year security since March 2011, according to prices from the Inter Dealer Market Association.

The government sold 10.65 trillion rupiah of bills and bonds maturing in one to 30 years today, exceeding the indicative target of 7.5 trillion rupiah.

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