Rupiah Forwards Drop to 4-Year Low as Oil Worsens Trade Outlook

Rupiah forwards slumped to a four-year low on concern a U.S. strike against Syria will push up oil prices and worsen Indonesia’s record trade deficit. Stocks fell on speculation there will be more interest-rate increases.

One-month non-deliverable contracts slid 0.9 percent, the most since the 2.5 percent plunge on Aug. 27 that was the steepest since September 2011, data compiled by Bloomberg show. The contracts traded at 11,620 per dollar as of 4:12 p.m. in Jakarta, 4.3 percent weaker than the spot rate, and reached 11,788 earlier, the lowest level since April 2009.

U.S. President Barack Obama won support yesterday from Republican and Democratic leaders on the Senate Foreign Relations Committee on a draft resolution authorizing military force in Syria after the alleged use of chemical weapons. Indonesia’s trade shortfall widened to $2.3 billion in July and oil and gas imports rose 50 percent, accounting for almost a quarter of overseas purchases, official data show.

“There’s ongoing depreciation pressure on the rupiah after the trade numbers,” said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The NDFs are a better reflection of rupiah’s broad direction. We will probably see continued divergence between the spot and NDFs in the near term until the spot converges with what offshore rates are implying.”

Brent crude prices climbed 1.3 percent this week to $115.55 per barrel and are up 13 percent this quarter. The cost reached $117.34 on Aug. 28, the highest since February.

Negative Sentiment

The rupiah fell 0.5 percent in the spot market to 11,125 per dollar, after touching 11,170 earlier, the weakest level since April 2009, prices from local banks compiled by Bloomberg show. The spot rate should weaken toward 12,000 per dollar before year-end, ANZ’s Goh said. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 69 basis points, or 0.69 percentage point, to 18.93 percent.

“Negative sentiment from the record trade deficit and external factors continue,” said Rully Nova, a currency analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “Conflict in Syria is boosting oil prices, which will further weigh on the trade balance and subsequently the rupiah.”

The Jakarta Composite index of shares fell 2.2 percent to 4,073.455 and is down 15 percent this quarter. Trading volumes were 31 percent above its 30-day average. Bank Indonesia raised its reference rate by 50 basis points to 7 percent at an unscheduled meeting last week, following an increase of 75 basis points over the June and July meetings.

Interest Rates

PT Bank Central Asia, the nation’s biggest lender by market value, declined 3.4 percent and PT Astra International lost 3.4 percent. PT Telekomunikasi Indonesia, the country’s biggest telecommunication company, fell 4.6 percent.

“The rupiah has failed to stabilize after the latest interest-rate increase,” said Jeffrosenberg Tan, portfolio manager at PT Sinarmas Asset Management in Jakarta, which oversees 6 trillion rupiah. “The market will speculate there will be more increases in interest rates.”

A fixing used to settle the rupiah forwards was set by the Association of Banks in Singapore at 11,491 per dollar, compared with 11,293 per dollar yesterday. The rupiah lost 11 percent this quarter, the second-worst performance among 24 emerging-market currencies tracked by Bloomberg.

Improving data in the U.S. are also weighing on the rupiah amid concern the Federal Reserve will pare stimulus that’s boosted demand for assets in developing countries.

Bonds Drop

The Institute for Supply Management’s manufacturing index for the U.S. rose to 55.7 last month, exceeding the median estimate of 54 economists in a Bloomberg News survey, a report showed yesterday. The Fed will start reducing its stimulus in September, according to 65 percent of analysts in a Bloomberg survey conducted last month.

“Concern over the Fed tapering gives little breathing room for the rupiah until there’s more certainty,” Nova said.

The yield on Indonesia’s 5.625 percent government bonds due May 2023 rose 16 basis points to 8.77 percent, highest level since Aug. 28, according to prices from the Inter Dealer Market Association.

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