Rupiah Advances to Three-Week High After Court Upholds Election

The rupiah rose to a three-week high after Indonesia’s Constitutional Court rejected a challenge to the results of the July 9 election, clearing the final hurdle for Joko Widodo to become president in October.

The court dismissed Prabowo Subianto’s case late yesterday, saying there was no evidence to support his team’s claims of structured, massive and systematic fraud. Prabowo “respects” the decision, which can’t be appealed, his spokesman Tantowi Yahya told reporters after the announcement. Federal Reserve Chair Janet Yellen may comment on U.S. interest rates when she speaks later today from Jackson Hole, Wyoming.

“The court’s affirmation of Jokowi’s victory pushed one big uncertainty out of the way,” said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The market’s expecting Yellen to reiterate her fairly dovish view.”

The rupiah advanced 0.1 percent to close at 11,679 per dollar, prices from local banks show. It reached 11,643 earlier, the strongest level since Aug. 1, and was little changed for the week.

In the offshore market, one-month non-deliverable forwards climbed 0.1 percent to 11,731, 0.4 percent weaker than the onshore spot rate, data compiled by Bloomberg show. The contracts rose 0.3 percent since Aug. 15. Bank Indonesia set a fixing used to settle the forwards at 11,654 per dollar, the strongest since July 25, compared with 11,693 on Aug. 15.

The Jakarta Composite index of shares fell 0.1 percent to 5,198.896, snapping a four-day advance. The gauge rose as much as 0.3 percent earlier. PT Astra International dropped 0.6 percent, PT Matahari Department Store declined 2.1 percent and PT United Tractors retreated 2.7 percent.

Volatility, Bonds

One-month implied volatility in the rupiah, a measure of expected swings in the exchange rate used to price options, dropped five basis points, or 0.05 percentage point, to 9.06 percent, data compiled by Bloomberg show. The gauge gained 13 basis points this week.

Widodo, known as Jokowi, plans to reduce fuel subsidies gradually and pledged to boost economic growth to more than 7 percent by cutting red tape and attracting investment. As Jakarta governor, he has restarted stalled public transport projects and dismissed senior officials for poor performance.

“Joko Widodo’s confirmation should be positive in the medium to long run as we can see his policies getting implemented,” said Daphne Roth, the Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion. “The market is falling today as valuations are getting too high.”

The yield on the government’s 8.375 percent bonds due March 2024 fell seven basis points to 8.24 percent, the most since June 30, according to the Inter Dealer Market Association. The yield rose two basis points this week.

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