Rupiah Weakens Most Since December After Best Rally Since 2009

Indonesia’s rupiah dropped the most since December, following the biggest weekly gain in four years, as trading patterns signaled the rally was overstretched.

The currency fell 0.5 percent to 11,844 per dollar as of 4:06 p.m. in Jakarta, prices from local banks show. In the offshore market, one-month non-deliverable forwards slid 1.2 percent in the biggest drop since Jan. 24 to 11,818, according to data compiled by Bloomberg. The contracts traded 0.2 percent stronger than the onshore rate.

The rupiah rose 2.8 percent last week in the best five-day gain since 2009, sending the dollar’s 14-day relative-strength index to 24 yesterday. Readings below 30 indicate a turnaround is likely. Indonesia’s December trade balance swung to the largest surplus since 2011, before a ban on mineral ore exports came into effect last month. That narrowed the current-account deficit to 1.98 percent of gross domestic product last quarter, from 3.85 percent in the prior period.

“We’ve seen a very good performance by the rupiah, so this is just a retracement of that,” said Andy Ji, Singapore-based currency strategist at Commonwealth Bank of Australia. “The current account was helped by exporters boosting shipments before the ore ban. We want to see two more quarters of sustainable deficits before we can be sure of a recovery.”

Bank Indonesia sees a current-account shortfall of about 0.25 percent to 2.5 percent as sustainable, Governor Agus Martowardojo said in November.

One-month implied volatility, a measure of expected moves in the rupiah used to price options, rose 28 basis points to 11.5 percent, according to data compiled by Bloomberg. A fixing used to settle the rupiah forwards was set at 11,719 per dollar by the Association of Banks in Singapore, from 11,605 yesterday.

Debt Auction

Indonesia raised 12.25 trillion rupiah ($1 billion) today by selling local-currency bonds due in one to 20 years at an auction today, exceeding its 10 trillion rupiah target, Robert Pakpahan, director general at the finance ministry’s debt management office in Jakarta, said in a text message.

The yield on government notes due March 2024 climbed three basis points, or 0.03 percentage point, to 8.51 percent, prices from the Inter Dealer Market Association show. The yield fell to 8.48 percent yesterday, the lowest since Jan. 20.

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