Rupiah Gains on Bets Court to Dismiss Challenge to Jokowi Win

Indonesia’s rupiah rose the most in almost two weeks on bets judges will dismiss a challenge to incoming president Joko Widodo’s election victory.

On Aug. 6, the court questioned evidence provided by losing candidate Prabowo Subianto, who says Widodo’s victory is invalid because it was obtained “unlawfully” or through “abuse of authority” by the election commission. Chief Justice Hamdan Zoelva ordered the commission, the election supervisory agency and Widodo’s legal team to respond to the suit by today.

“Domestic sentiment improved as Prabowo’s claims are seen as weak,” said Dian Ayu Yustina, an economist at PT Bank Danamon in Jakarta. “Jokowi’s moves in forming a transition team and studying the budget even before he takes power are unprecedented and promising.”

The rupiah advanced 0.9 percent to close at 11,673 per dollar, the biggest gain since July 23, prices from local banks show. Indonesia’s markets were closed for Eid holidays the week of July 28 to Aug. 1. In the offshore market, one-month non-deliverable forwards rose 0.3 percent to 11,765, 0.8 percent weaker than the onshore spot price, according to data compiled by Bloomberg.

Widodo, also known as Jokowi, has pledged to cut bureaucracy and fuel subsidies while attracting more investment. Indonesia faces the slowest economic growth in five years and a widening trade deficit, just as investors start to back away from emerging-market currencies they consider higher risk.

Fixing, Volatility

The central bank set a fixing used to settle rupiah forwards at 11,728 per dollar today, from Aug. 8’s 11,822.

One-month implied volatility, a measure of expected swings used to price options, declined two basis points to 9.85 percent, data compiled by Bloomberg show. The premium on options giving the right to sell the rupiah over those to buy fell to a four-year low on Aug. 8, signaling a potential turnaround in the currency that has lost 0.8 percent this month.

Indonesia’s foreign reserves climbed to $110.5 billion last month, the highest level since December 2012, from $107.7 billion in June, Bank Indonesia said in an e-mailed statement on Aug. 8. This signals that the monetary authority is tolerating some rupiah weakness, Yustina said.

The yield on the government’s 8.375 percent bonds due March 2024 fell two basis points, or 0.02 percentage point, to 8.28 percent, according to the Inter Dealer Market Association. That ended five straight days of advance on the yield.

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