Rupiah Has Best Month Since 2009 as Current Account Improves

Indonesia’s rupiah had its best monthly gain in almost five years as a narrower current-account deficit spurred buying of the nation’s assets.

The rupiah surged 5.2 percent in February to 11,609 per dollar as of 4:12 p.m. in Jakarta, the most since April 2009, prices from local banks show. In the offshore market, one-month non-deliverable forwards rose 5.2 percent to 11,614 per dollar, data compiled by Bloomberg show. The spot rate climbed 0.5 percent today, while the contracts advanced 0.9 percent.

Overseas funds added 15.5 trillion rupiah ($1.3 billion) to local-currency sovereign debt holdings this month through Feb. 25 and bought $614 million more local stocks than they sold through yesterday. The current-account gap shrank to 1.98 percent of gross domestic product last quarter, from 3.85 percent in the prior period, official data show. Foreign reserves climbed above $100 billion in January for the first time since May.

“The positive string of data gave investors confidence to buy Indonesian assets,” said Rully Nova, a foreign-exchange analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “We think the external balance will keep improving steadily, and the rupiah could reach 11,400 per dollar by end-March.”

Bank Indonesia sees the current-account shortfall staying below 2 percent of GDP this quarter as exports will remain strong this month and the next, Deputy Governor Perry Warjiyo said in Jakarta today.

Volatility, Fixing

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 139 basis points, or 1.39 percentage points, this month to 11.32 percent, according to data compiled by Bloomberg. It dropped four basis points today.

A fixing used to settle the forwards was set at 11,604 per dollar today, from 12,171 on Jan. 30, by the Association of Banks in Singapore, while Bank Indonesia’s benchmark was placed at 11,634 per dollar today, compared with 12,226 last month.

The yield on the government’s 8.375 percent bonds due March 2024 slid 66 basis points to 8.37 percent, according to the Inter Dealer Market Association. That was the biggest decline since October. The yield dropped four basis points today.

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