Rupiah Forwards Post Biggest Discount to Onshore Spot Since 2011

Indonesia’s rupiah forwards are offering the biggest discount to the onshore spot rate since September 2011, after falling the most in almost two years on rising speculation the Federal Reserve will pare stimulus.

One-month non-deliverable contracts plunged 2.4 percent to 11,441 per dollar as of 11:35 a.m. in Jakarta, data compiled by Bloomberg show. That’s 5.7 percent weaker than the onshore spot rate, which declined 0.5 percent to 10,825, the lowest level since April 2009. The forwards fell as much as 2.9 percent earlier to 11,493, a 6 percent discount.

The Bloomberg Dollar Index climbed for a second day to reach a two-week high after Fed officials said they are “comfortable” with the plan to start tapering $85 billion of monthly bond purchases later this year, according to the minutes of the July meeting released yesterday. Indonesia will draft a policy within two days to address the nation’s economic issues, with the rupiah the main focus, President Susilo Bambang Yudhoyono said yesterday amid the widest current-account deficit since at least 1989.

“The forwards are pricing in the possibility of Fed tapering in September,” said Rully Nova, a currency analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “The government should allow the rupiah to weaken to adjust imports, which will subsequently help the currency.”

Bond Losses

Indonesia’s current-account shortfall widened to $9.8 billion last quarter, from $5.8 billion in the previous three months, the central bank reported on Aug. 16. Exports have contracted for 15 straight months through June.

A rupiah fixing used to settle the forwards set by the Association of Banks in Singapore was at 11,014 today, the weakest since December 2008. One-month implied volatility in the currency, a measure of expected moves in the exchange rate used to price options, rose 228 basis points, or 2.28 percentage points, to 20.31 percent, data compiled by Bloomberg show.

Ten-year government bonds advanced for a second day, with the yield on the notes due May 2023 falling two basis points to 8.44 percent, prices from the Inter Dealer Market Association show. Indonesia’s local-currency sovereign debt posted a loss of 16 percent this year, the worst performance among 10 indexes compiled by HSBC Holdings Plc.

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