Rupiah Completes Biggest Weekly Drop in a Month on Dollar Gains

Indonesia’s rupiah fell this week by the most in a month as demand for the dollar increased on speculation the Federal Reserve will stick with a plan to raise interest rates this year.

The Bloomberg Dollar Spot Index yesterday climbed to the highest level since its inception in 2004 before data due today that may show the U.S. unemployment rate dropped to 5.7 percent last month, the lowest since June 2008, according to the median forecast in a Bloomberg survey. While higher U.S. rates may damp appetite for emerging-market assets, Indonesia’s dollar bond sale this week drew bids for 4.8 times the $4 billion raised.

“We see continued gradual depreciation for the rupiah on the back of dollar strength,” said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd. “The global bond sale would help shore up reserves and allow the central bank to smooth fluctuations in the currency, but it won’t change the trend.”

The rupiah fell 0.9 percent from Jan. 2 to close at 12,655 a dollar, the biggest loss since the week ended Dec. 12, prices from local banks show. One-month non-deliverable forwards dropped 0.7 percent to 12,708, data compiled by Bloomberg show. The spot rate gained 0.2 percent today.

Bank Indonesia set a fixing used to settle the forwards at 12,640, compared with 12,474 on Jan. 2. Foreign reserves climbed 0.7 percent to $111.9 billion in December, from $111.1 billion the previous month, the central bank reported yesterday.

Global funds pulled a net $57.6 million from Indonesian stocks so far in January, adding to the $634 million of outflows in December, exchange data show.

Local-currency government bonds rose this week, with the yield on notes due September 2025 falling 11 basis points, or 0.11 percentage point, to 7.92 percent, prices from the Inter Dealer Market Association show.

Before it's here, it's on the Bloomberg Terminal.