Rupiah Forwards Decline Most in a Week on Weaker Export Outlook

Indonesia’s rupiah forwards fell the most in a week on concern slowing global economic growth will hurt the nation’s exports, which dropped for a 17th month in August. Government bonds advanced.

The International Monetary Fund yesterday cut its global economic expansion outlook for this year to 2.9 percent from an earlier projection of 3.1 percent. The U.S. risks a “very deep recession” if Congress doesn’t raise the $16.7 trillion debt ceiling, President Barack Obama said yesterday. The rupiah’s 14 percent decline last quarter is in line with Indonesia’s fundamentals, the central bank said in a statement yesterday.

Rupiah one-month non-deliverable forwards declined 0.2 percent to 11,313 per dollar as of 4:28 p.m. in Jakarta, the biggest drop since Oct. 2, data compiled by Bloomberg show. The offshore contracts were 1.9 percent stronger than the onshore spot rate, which weakened 0.1 percent to 11,533 per dollar, according to prices from local banks. The spot rate has traded between 11,490 and 11,575 over the past week.

“The uncertain global economy is pressuring the rupiah as it weighs on the export outlook,” said Nurul Eti Nurbaeti, Jakarta-based head of treasury research at PT Bank Negara Indonesia. “The rupiah should be stable near this new equilibrium as both the central bank and the government seem comfortable with this level to help limit imports.”

Growth Forecasts

The IMF cut its growth forecast for China, Indonesia’s biggest overseas market, to 7.3 percent next year from a July projection of 7.7 percent. China took 14 percent of the nation’s non-oil shipments in August, official data show. The Washington-based lender cut its 2013 expansion forecast for Indonesia to 5.3 percent from 6.3 percent.

A daily fixing used to settle offshore rupiah forwards was set at 11,214 per dollar, from 11,191 yesterday, according to the Association of Banks in Singapore. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell six basis points, or 0.06 percentage point, to 15.61 percent, data compiled by Bloomberg show.

Bank Indonesia issued guidelines for individuals and companies, including state-owned firms, to hedge against currency swings, it said in a statement posted on its website today. The central bank kept its benchmark interest rate at 7.25 percent. The hold was predicted by 17 of 18 economists surveyed by Bloomberg. The monetary authority has increased the rate by 1.5 percentage points since mid-June.

“Tight and prudent monetary policy is still needed to maintain monetary stability, especially amid global uncertainty,” Aldian Taloputra, an economist at PT Mandiri Sekuritas in Jakarta, wrote in a report today, forecasting the reference rate will be raised to 7.5 percent by year-end.

The yield on the government’s 5.625 percent bonds due May 2023 dropped two basis points to 8.05 percent, the lowest level since Sept. 24, according to prices from the Inter Dealer Market Association. The yield has dropped 45 basis points this month.

Before it's here, it's on the Bloomberg Terminal.