Rupiah Forwards, Bonds Plunge as Oil Gains Worsen Trade Outlook

Rupiah forwards plunged for a fourth week and bonds declined on concern rising oil prices related to the threat of U.S. military action in Syria will worsen Indonesia’s trade deficit.

The rupiah slid 11 percent this quarter, the worst performance among 24 emerging-market currencies tracked by Bloomberg, due to record current account and trade shortfalls. Purchases of oil and gas by Indonesia, a net importer of crude, increased 50 percent in July, while exports fell for a 16th month, official data showed this week.

“Oil prices are the key issue, as they feed into the trade, current account and budget deficits,” said Leo Rinaldy, a Jakarta-based economist at PT Mandiri Sekuritas, a unit of the nation’s largest bank by assets. The decline in foreign-exchange reserves may have slowed in August, providing “some relief,” Rinaldy said.

One-month non-deliverable forwards fell 3.5 percent this week to 11,845 per dollar as of 4 p.m. in Jakarta and reached 11,958 today, the lowest level since March 2009, according to data compiled by Bloomberg.

In the spot market, the currency dropped 2.3 percent to 11,176 per dollar from Aug. 30, declining for a ninth straight week in the longest losing streak since 2004, prices from local banks compiled by Bloomberg show. The forwards contracts traded 5.6 percent weaker than the spot rate today.

Reserves Rise

Bank Indonesia continues to stabilize the rupiah in the market, Deputy Governor Perry Warjiyo told reporters in Jakarta today.

The nation’s foreign-exchange reserves climbed 0.3 percent in August to $93 billion, the central bank reported today. The holdings depleted to $92.7 billion in July, the least since October 2010, on speculation policy makers intervened to stem the rupiah’s slide.

The price of Brent crude climbed for a fourth week as President Barack Obama meets other Group of 20 leaders in St. Petersburg in an effort to win a measure of political cover for a military strike on Syria in response to an alleged chemical weapons attack.

Brent crude rose 1.2 percent this week to $115.41 per barrel and reached $117.34 on Aug. 28, the highest level since February. The price may climb to $120 to $125 if the U.S. and its allies begin military action, Michael Wittner, head of oil market research at Societe Generale SA in New York, wrote in a research report last month.

Indonesia’s trade deficit climbed to a record $2.3 billion in July, while the current-account shortfall widened to $9.8 billion in the second quarter, the largest in data compiled by Bloomberg going back to 1989.

Bonds Slide

One-month implied volatility in the rupiah, a measure of expected moves in the exchange rate used to price options, rose 240 basis points, or 2.4 percentage points, to 20.79 percent this week, the highest level since September 2011, according to data compiled by Bloomberg.

A fixing used to settle the rupiah forwards was set at 11,694 per dollar today, compared from 11,275 on Aug. 30, according to the Association of Banks in Singapore.

The yield on Indonesia’s bonds due May 2023 climbed 50 basis points this week to 8.91 percent, according to prices from the Inter Dealer Market Association. That’s the highest level for 10-year local sovereign debt since February 2011.

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