Rupiah Falls for Fourth Week as Central Bank Tolerates Weakness

Indonesia’s rupiah declined for a fourth straight week as the central bank signaled that it will tolerate a weaker currency.

The rupiah fell 0.4 percent from Feb. 27 to close at 12,974 a dollar on Friday in Jakarta, prices from local banks show. It rose 0.1 percent for the day after reaching 13,030 on Thursday, the weakest since August 1998.

An undervalued exchange rate can help exports of manufactured goods, and the nation needs to reduce imports, Bank Indonesia’s Senior Deputy Governor Mirza Adityaswara said Thursday. The rupiah trading at 12,950 to 13,000 is “normal” as a recovery in the U.S. economy boosts the greenback, Governor Agus Martowardojo said Friday. The central bank cut its benchmark rate for the first time in three years on Feb. 17.

“The central bank has indicated that it’s comfortable with the weaker rupiah,” said Nurul Eti Nurbaeti, head of treasury research at PT Bank Negara Indonesia. “This is a way to address the current account even as the economy shifts its focus to growth after the high interest-rate environment.”

The government is seeking to boost economic growth to 5.7 percent in 2015, from a five-year low of 5.02 percent last year.

One-month non-deliverable forwards gained 0.1 percent this week and rose 0.2 percent on Friday to 13,113 a dollar, data compiled by Bloomberg show. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 40 basis points, or 0.40 percentage point, this week to 11.99 percent, data compiled by Bloomberg show.

Adityaswara said Thursday Bank Indonesia will always be in the market to reduce volatility, and the nation’s current-account deficit will likely be at 3 percent to 3.1 percent of gross domestic product this year, from 2.95 percent in 2014.

Government bonds due September 2025 declined for the first week in three, with the yield climbing 38 basis points to 7.44 percent, the highest since Feb. 16, according to the Inter Dealer Market Association.

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