Rupiah Drops Most in a Week as Debt Payments Fuel Dollar Demand

Indonesia’s rupiah fell the most in more than a week amid speculation local companies are boosting dollar purchases to meet month-end debt and import payments. Government bonds declined.

The currency weakened 0.9 percent to 11,448 per dollar as of 4:04 p.m. in Jakarta, the biggest drop since Sept. 11, prices from local banks show. In the offshore market, one-month non-deliverable forwards declined 0.4 percent to 11,290, 1.4 percent stronger than the spot rate. The contracts were on average 2.2 percent weaker than the onshore rate in the past month.

The currency sank 5.9 percent in August, the biggest loss since November 2008, and the central bank said Sept. 12 that recent moves were justified by economic fundamentals and the depreciation would help rein in the nation’s current-account deficit. Bank Indonesia doesn’t want to see the rupiah “too strong,” spokesman Peter Jacobs said last week. The current-account gap was a record $9.8 billion in the second quarter and imports exceeded exports by $2.3 billion in July.

“The view is still bearish on the rupiah in the short term,” said Suriyanto Chang, head of treasury at PT Bank QNB Kesawan in Jakarta. “There’s regular dollar demand from companies around this time, but the rupiah should be supported at about 11,500 as there’s a lot of interest to sell dollars around that level.”

One-month implied volatility for the rupiah, a measure of expected moves in the exchange rate used to price options, dropped nine basis points to 16.76 percent, data compiled by Bloomberg show. A fixing used to settle the rupiah forwards was set at 11,136 per dollar today, from 11,011 on Sept. 20, according to the Association of Banks in Singapore.

Reduce Volatility

Bank Indonesia remains in the market to reduce volatility in the rupiah, Deputy Governor Hendar, who like many Indonesians goes by only one name, said in Jakarta today.

“With the rupiah weakening, the trade deficit will eventually recover on slower imports and see the rupiah consolidate toward 10,800 by year-end,” Chang said.

The yield on the nation’s 5.625 percent bonds due May 2023 rose four basis points, or 0.04 percentage point, to 7.92 percent, according to prices from the Inter Dealer Market Association.