Rupiah Falls to Weakest Since 2009, Bonds Drop on Fed Minutes

Indonesia’s rupiah dropped to the weakest level since March 2009 and government bonds fell after minutes of the Federal Reserve’s meeting spurred speculation stimulus may be trimmed sooner than previously expected.

The currency dropped 0.4 percent to 11,703 per dollar as of 4:22 p.m. in Jakarta, prices from local banks show. It reached 11,733 earlier, the weakest level since March 31, 2009. In the offshore market, one-month non-deliverable forwards declined 0.5 percent to 11,608 per dollar, 0.8 percent stronger than the onshore spot rate, data compiled by Bloomberg show.

The U.S. central bank expects data showing continued labor market recovery in the world’s largest economy to “warrant trimming the pace of purchases in coming months,” according to the minutes released yesterday, referring to its record $85 billion a month of bond buying that has buoyed emerging-market assets. Global funds sold $322 million more Indonesian stocks than they bought in November through yesterday, set for the biggest monthly outflow since August, exchange data show.

“The decline is across the board in reaction to the Fed meeting minutes,” said Suriyanto Chang, head of treasury at PT Bank QNB Kesawan in Jakarta. “In the coming months can mean anything, but the rupiah is under pressure as investors are still concerned the tapering will happen sooner.”

The yield on the nation’s 5.625 percent bonds maturing in May 2023 climbed 20 basis points, or 0.20 percentage point, to 8.52 percent, the highest level since Sept. 12, prices from the Inter Dealer Market Association show.

A fixing used to settle the rupiah forwards was set at 11,513 per dollar, from 11,407 yesterday, according to the Association of Banks in Singapore. One-month implied volatility in the rupiah, a measure of expected moves in the exchange rate used to price options, rose 26 basis points to 14.49 percent.

The Finance Ministry plans to raise $450 million at its debut domestic dollar bond auction on Nov. 25, it said in a statement on its website. The government will offer notes maturing in May 2017 at the sale.

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