Rupiah in Longest Losing Streak Since January 2004; Bonds Rise

Indonesia’s rupiah fell for a 10th day, the longest losing streak since January 2004, after the central bank said it allowed the currency to weaken. The 10-year government bond yield dropped to the lowest in a week.

The rupiah touched the weakest level since September 2009 today and has lost 0.9 percent since July 11, the day before Bank Indonesia Deputy Governor Perry Warjiyo said the monetary authority has supplied dollars to the market over the past two to three months and allowed the currency to gradually decline. Citigroup Inc. raised its 2014 current-account deficit forecast for Indonesia as the outlook for commodity prices dims and the Chinese economy slows, a note showed yesterday.

“Bank Indonesia has done its job well in maintaining currency stability, while letting it gradually weaken,” said Mika Martumpal, head of treasury research and strategy at PT Bank CIMB Niaga in Jakarta. “Weaker regional growth will continue to pressure the external balance and subsequently the rupiah.”

The rupiah dropped 0.2 percent to 10,060 per dollar as of 1:14 p.m. in Jakarta, after reaching 10,063 earlier, prices from local banks show. The currency has declined 5.8 percent in the past 12 months. One-month non-deliverable forwards fell 0.5 percent to 10,471, trading at a 3.9 percent discount to the spot rate, the biggest difference since June 24.

The rupiah at 10,000 per dollar is not a cause for concern as it is in line with economic fundamentals, Bank Indonesia Governor Agus Martowardojo said yesterday.

Bonds Rise

The central bank will auction foreign-exchange swaps for the first time today, Peter Jacobs, director of communications, said by phone. The instruments would help manage liquidity and attract capital inflows, Filianingsih Hendarta, executive director of monetary management, said on July 11.

Global funds pulled 19.2 trillion rupiah ($1.9 billion) from local-currency government notes since May 22, when the Federal Reserve signaled it may reduce stimulus, paring net inflows into Indonesia this year to 13.7 trillion rupiah.

One-month implied volatility for the rupiah, a measure of expected moves in the exchange rate used to price options, climbed 1.28 percentage points to 13.83 percent, according to data compiled by Bloomberg.

The yield on the government’s 5.625 percent bonds due May 2023 fell seven basis points, or 0.07 percentage points, to 8.13 percent, prices from the Inter Dealer Market Association show.

Deficit Concerns

BlackRock Inc., which managed $3.94 trillion of global assets as of March, is cautious on Indonesia and India bonds, its head of Asia-Pacific fixed income Joel Kim said at a briefing in Singapore today.

“Markets that we do not like from a macro perspective are still markets that have seen relatively strong influx combined with current-account deficits and relatively poor fundamentals,” Kim said.

Indonesia’s current-account shortfall will be 2.2 percent of gross domestic product in 2014, according to Citigroup Jakarta-based economist Helmi Arman, compared with the lender’s previous estimate of 1.8 percent. The deficit was 2.8 percent last year and 3 percent in the first quarter of 2013, official data shows.

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