Rupiah Weakens Most in a Month as Political Risk Damps Demand

Indonesia’s rupiah fell the most in a month on speculation election results and the potential widening of the current-account deficit will damp demand for the nation’s assets.

No party won the minimum level of support in the April 9 legislative election required to nominate a presidential candidate on its own, according to an unofficial tally, and the three biggest parties haven’t announced vice-presidential nominees yet. The current-account shortfall probably exceeded 2 percent of gross domestic product last quarter, compared with 1.98 percent in the previous three months, central bank Governor Agus Martowardojo said on Bloomberg TV Indonesia last week.

“We’re waiting to see who will pair up with whom for the presidential election, so the market is getting impatient and pulling back a little,” said Irene Cheung, a Singapore-based currency strategist at Australia & New Zealand Banking Group Ltd. “We’re still looking at a weaker rupiah.”

The rupiah fell 1 percent, the biggest drop since March 20, to close at 11,630 per dollar, prices from local banks show. That took the decline in April to 2.3 percent. In the offshore market, one-month non-deliverable forwards lost 0.8 percent to 11,675, 0.5 percent weaker than the onshore spot rate, according to data compiled by Bloomberg.

Bank Indonesia set a fixing used to settle the forwards at 11,590 per dollar, compared with 11,486 yesterday. One-month implied volatility, a measure of expected swings in the currency used to price options, climbed 40 basis points to 11.09 percent.

Indonesia’s 8.375 percent bonds due March 2024 fell for an eighth day, the longest losing streak for a benchmark note of that maturity since August. The yield climbed one basis point, or 0.01 percentage point, to 8.09 percent, the highest level since March 27, according to the Inter Dealer Market Association.

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