Rupiah Weakens Beyond 12,000 a Dollar for First Time Since 2009

Indonesia’s rupiah weakened beyond 12,000 per dollar for the first time since 2009 on speculation local companies boosted foreign-currency purchases to make payments before the end of the month. Stocks and bonds declined.

The currency touched 12,028 per dollar, the lowest level since March 2009, before trading 1.1 percent weaker at 12,015 as of 4:25 p.m. in Jakarta, prices from local banks show. It slid 2.7 percent this week. In the offshore market, one-month non-deliverable forwards dropped 0.4 percent to 11,974, data compiled by Bloomberg show.

The rupiah’s recent decline is due to external factors and increased dollar demand toward the end of the month, Bank Indonesia Governor Agus Martowardojo said yesterday. The central bank is ready to intervene in the currency market to reduce volatility, spokesman Difi Johansyah said today. U.S. jobless claims unexpectedly fell last week, data showed yesterday, after the Federal Reserve said it might reduce stimulus “in coming months” should the U.S. economy improve.

“It’s a breach of another psychological level, but it’s more due to corporate dollar demand and Fed concern, than macro problems,” said Ezra Nazula, head of fixed income at PT Manulife Asset Management in Jakarta. “We don’t expect more large outflows as the current rupiah level and yields have more or less priced in Fed tapering.”

Failed Sale

The yield on the nation’s bonds due May 2023 climbed seven basis points, or 0.07 percentage point, to 8.63 percent, the highest level since Sept. 11, prices from the Inter Dealer Market Association show.

The government swapped 550 billion rupiah ($46 million) of debt due in 2014 through 2018 by offering notes maturing in 2024 today. Indonesia raised $190 million from selling domestic dollar bonds on Nov. 25, short of the $450 million goal.

“The disappointing bond auction shows there is still an imbalance in dollar demand and supply,” said Irene Cheung, foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The 12,000 level is a very important psychological level, so crossing that would make the market even more nervous,” she said today before it was breached.

Global funds sold a net $354 million of Indonesian stocks this month through yesterday, set for largest outflow since August, exchange data show. The Jakarta Composite index of shares dropped 0.4 percent today to the lowest close in more than two months. PT United Tractors fell 5.4 percent, the biggest drag on the gauge, while PT Bank Mandiri, the country’s largest lender by assets, declined 0.7 percent.

Rupiah ‘Oversold’

The central bank increased the benchmark interest rate by 1.75 percentage points this year to 7.5 percent, while the government eased mineral-export quotas and raised import taxes on luxury goods to reduce the current-account shortfall.

The deficit narrowed to 3.8 percent of gross domestic product last quarter, from a record 4.4 percent in the previous period, official data show. Foreign reserves fell 18 percent from the end of last year to $92.7 billion in July, the lowest level since 2010. Bank Indonesia’s foreign-currency holdings have since climbed to $97 billion in October.

“The rupiah is oversold as there are no strong reasons for this rapid decline,” said Mika Martumpal, head of treasury research and strategy at PT Bank CIMB Niaga in Jakarta. “The significance of the 12,000 level is reduced by improved foreign reserves and the narrowing current-account gap, which show government measures are working.”

A daily fixing used to settle the rupiah forwards was set at 11,785 per dollar today, from 11,662 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, rose four basis points to 14.84 percent.

“Right now, Bank Indonesia is trying to reduce the currency’s volatility, so that people who have dollars want to sell their dollars because there’s stability in the market,” Bank Indonesia’s Johansyah told reporters in Jakarta today.

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