Rupiah Forwards Drop a Fourth Day on Dollar Demand for Payments

Indonesia’s rupiah forwards fell for a fourth day on speculation importers boosted dollar purchases to meet payments amid concern the U.S. will be unable resolve its debt ceiling debate. Stocks and bonds dropped.

Local companies have $33.8 billion of external debt coming due in August through December, Bank Indonesia data show. Imports rose 6.5 percent in July from a year earlier, a period that included part of the Muslim fasting month of Ramadan. President Barack Obama won’t negotiate with Republicans on raising the country’s borrowing allowance, Treasury Secretary Jacob J. Lew said yesterday.

“Dollar demand tends to peak in September, after importers boosted their activity over Ramadan and are now fulfilling their payments,” said Rully Nova, a foreign-exchange analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “If the debt ceiling debate isn’t resolved, then the U.S. may default and Treasury yields will rise, which will see funds retreating from emerging markets.”

Rupiah one-month non-deliverable forwards dropped 0.2 percent to 11,384 per dollar as of 4:18 p.m. in Jakarta, data compiled by Bloomberg show. The contracts were 0.9 percent stronger than the spot rate, after trading 1.8 percent weaker on average in the past month. In the onshore market, the currency declined 0.1 percent to 11,485 per dollar, after reaching 11,590 earlier, the weakest level since April 2009, prices from local banks show.

Borrowing Costs

The Jakarta Composite Index of shares fell 1.2 percent to 4406.767 after dropping as much as 2.4 percent earlier. The gauge has lost 5.7 percent in four days. Banking and property stocks were among the biggest decliners, with PT Bank Mandiri down 4.1 percent, PT Bank Rakyat Indonesia decreasing 3.2 percent and PT Lippo Karawaci, a real-estate developer, falling 4.2 percent.

Bank Indonesia has raised its benchmark interest rate by 1.5 percentage points to 7.25 percent since the middle of June and next meets to review policy on Oct. 8. Stocks may have fallen on concern the weakening rupiah makes the central bank more likely to increase borrowing costs, said Syaiful Adrian, an analyst at PT Ciptadana Securities in Jakarta.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 38 basis points, or 0.38 percentage point, to 16.89 percent, data compiled by Bloomberg show. A fixing used to settle the forwards was set at 11,221 per dollar toda, from 11,171 yesterday, according to the Association of Banks in Singapore.

Trade Deficit

Indonesia’s trade deficit surged to a record $2.3 billion in July as overseas purchases climbed, while exports contracted for a 16th consecutive month. August data is due Oct. 1.

“The rupiah will stabilize and trend toward strengthening as upcoming data will be positive,” said Leo Rinaldy, a Jakarta-based economist at PT Mandiri Sekuritas, a unit of Indonesia’s largest bank by assets. “The trade deficit should fall significantly in August to less than $1 billion as imports ease.”

The yield on the nation’s 5.625 percent bonds due May 2023 rose nine basis points to 8.04 percent, the highest level since Sept. 18, according to prices from the Inter Dealer Market Association.

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