Rupiah Slides to April 2009 Low as Policy Measures Disappoint

Indonesia’s rupiah fell to the weakest since April 2009 and sovereign bonds dropped on concern policy makers’ steps to boost dollar supply are insufficient to buoy Asia’s second worst-performing currency.

Indonesia will offer tax deductions for export-oriented companies to boost overseas sales and narrow the current-account deficit, which was a record $9.8 billion last quarter, Finance Minister Chatib Basri said Aug. 23. Bank Indonesia announced measures aimed at increasing domestic foreign-currency supply on the same day. Nomura Holdings Inc. is maintaining a bearish view on the rupiah due to the “relatively ineffective policy package,” analysts led by Singapore-based Euben Paracuelles wrote last week.

“The measures were meant to address structural issues in the medium- to long-term, while the market was expecting more immediate steps to address the rupiah’s weakness,” said Eric Alexander Sugandi, an economist in Jakarta at Standard Chartered Plc. “It doesn’t mean the measures are bad, only that they will take at least a month to show any impact.”

The rupiah slid 0.6 percent to 10,848 per dollar as of 4 p.m. in Jakarta, after earlier reaching 10,883, the weakest level since April 2009, according to prices from local banks. The spot rate fell 3.7 percent last week in the worst five-day period since November 2008, and traded at a 5.1 percent premium to the one-month non-deliverable forwards, which lost 1.4 percent to 11,425, data compiled by Bloomberg show.

A fixing used to settle the forwards set by the Association of Banks in Singapore was set at 11,052 today, from 10,964 on Aug. 23. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 11 basis points, or 0.11 percentage point, to 17.88 percent, data compiled by Bloomberg show.

The yield on government bonds due May 2023 climbed seven basis points to 8.50 percent, prices from the Inter Dealer Market Association show. The rate added 67 basis points in August and 331 basis points this year.

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