Rupiah Drops to Four-Year Low After Trade Gap Swells to Record

Indonesia’s rupiah weakened to the lowest level in more than four years after the country reported a record trade deficit for July. Government bonds rose.

The currency’s forwards reversed gains as an official report today showed the shortfall widened to $2.3 billion, the largest ever, according to Suryamin, chairman of the country’s statistics office. The median estimate of economists surveyed by Bloomberg was for a $393 million deficit. Inflation surged to 8.79 percent in August, the fastest since January 2009 and close to the 8.95 percent forecast in another survey.

The rupiah slid 0.5 percent to 10,978 per dollar as of 4:09 p.m. in Jakarta, the weakest since April 2009, prices from local banks compiled by Bloomberg show. The spot was 4.7 percent stronger than the one-month non-deliverable forwards, which fell 0.5 percent to 11,497, data compiled by Bloomberg show.

“The market is surprised to see the trade figures,” said Eric Alexander Sugandi, a Jakarta-based economist at Standard Chartered Plc. “This is a result of Indonesia’s strong growth coupled with its dependence on imports for capital goods, while commodity prices remain weak.”

Imports rose 6.5 percent from a year earlier to $17.4 billion in July, the largest amount in data going back to January 2008, a report showed today. Exports fell 6.1 percent, the 16th monthly decline.

Volatility, Bonds

An offshore fixing used to settle forwards was set at 11,260 today by the Association of Banks in Singapore, 2.5 percent weaker than the spot rate. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 42 basis points, or 0.42 percentage point, to 18.81 percent, data compiled by Bloomberg show.

“Bank Indonesia is present in the market to guard rupiah stability,” said Fahrudin Haris Prastowo, a fixed-income trader at PT Bank Rakyat Indonesia in Jakarta. “A weakening rupiah would indirectly support exports and improve the trade balance, which should narrow in the coming months.”

The nation’s current-account deficit widened to a record $9.8 billion in the second quarter, according to central bank data. Standard Chartered plans to raise its forecast for this quarter’s shortfall following the trade data, Sugandi said, adding that it will be smaller than the previous three months.

The Central Statistics Agency will change the inflation base year to 2012 in October or November, Suryamin, who uses just one name, said on Aug. 1. The list of commodities included in consumer price basket will be expanded to more than 800 items from about 700, he added.

The yield on bonds due May 2023 fell one basis point to 8.40 percent, prices from the Inter Dealer Market Association show.

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