Indonesia’s Rupiah, Stocks Rally as Current-Account Gap Narrows

Indonesia’s rupiah rose by the most in almost three weeks, stocks led gains in Southeast Asia and bonds rallied after the current-account deficit narrowed.

The shortfall eased to 3.8 percent of gross domestic product last quarter, from a record 4.4 percent in the three months through June, Bank Indonesia said in a statement late yesterday. Global funds bought a net 960 billion rupiah ($84 million) of local-currency sovereign debt this month through yesterday, finance ministry data show. Janet Yellen, nominated as the next Federal Reserve chairman, said the U.S. economy must improve before the record stimulus can be reduced.

“We are seeing a lot of foreign inflows today after the current-account data showed improvement,” said Gusti Kahari, a foreign-exchange dealer at PT Bank Artha Graha Internasional in Jakarta. “I don’t expect the Fed to taper this year, but the rupiah will probably remain under pressure due to year-end dollar demand.”

The rupiah strengthened 0.5 percent to 11,545 per dollar as of 4:06 p.m. in Jakarta, the biggest advance since Oct. 25, prices from local banks show. In the offshore market, one-month non-deliverable forwards gained 0.5 percent to 11,461, trading 0.7 percent stronger than the onshore spot rate, data compiled by Bloomberg show.

Banks and property developers led gains in the Jakarta Composite index of shares, which closed 1.5 percent higher at 4,367.371, after losing 3.9 percent in the previous three days. PT Bank Rakyat Indonesia rose 4.1 percent, while property developer PT Bumi Serpong Damai jumped 6.6 percent and PT Astra International climbed 1.6 percent.

Volatility, Bonds

One-month implied volatility in the rupiah, a measure of expected moves in the exchange rate used to price options, increased one basis point, or 0.01 percentage point, to 14.78 percent. A daily fixing used to settle the forwards was set at 11,364 per dollar today, from 11,473 yesterday, by the Association of Banks in Singapore.

The yield on the government’s 5.625 percent bonds due May 2023 fell 13 basis points to 8.41 percent, the biggest drop since Oct. 23, according to prices from the Inter Dealer Market Association.

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