Rupiah Drops to Lowest Since 1998 as U.S. Jobs Data Boost Dollar

Indonesia’s rupiah fell to the weakest level since 1998 after a U.S. jobs report fueled speculation the Federal Reserve will raise interest rates by June.

Unemployment declined to 5.5 percent in February, the least in almost seven years, the U.S. Labor Department reported Friday. A gauge of dollar strength jumped 1.2 percent on March 6 in the biggest increase since November 2011. Bank Indonesia sees an undervalued exchange rate as helpful for exports, Senior Deputy Governor Mirza Adityaswara said March 5.

The rupiah dropped 0.6 percent, the most since Feb. 27, to close at 13,053 a dollar on Monday, prices from local banks compiled by Bloomberg show. It earlier fell to 13,077, the weakest since August 1998. The rupiah at 12,950 to 13,000 is “normal” as a recovery in the U.S. economy boosts the dollar, Bank Indonesia Governor Agus Martowardojo said Friday.

“The market worries that there will be further rupiah weakness after last week’s comments” by central bank officials, said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The dollar has strengthened further after the payrolls report, weighing on currencies across the region.”

One-month implied volatility for the rupiah, a measure of exchange-rate swings used to price options, jumped 52 basis points, or 0.52 percentage point, to 12.49 percent, data compiled by Bloomberg show. The rupiah’s one-month non-deliverable forwards advanced 0.4 percent to 13,190 a dollar, data compiled by Bloomberg show.

Government Bonds

Futures showed a 72 percent likelihood that the Fed will tighten by June, compared with 67 percent a week ago. Fed Chair Janet Yellen has started preparing investors for an increase this year, without saying that a move is imminent. She signaled in testimony to Congress that policy makers may drop their pledge to be “patient,” which would mean that rates could be raised at any meeting.

Indonesia’s government bonds due September 2025 declined, with the yield rising 13 basis points to 7.61 percent, according to the Inter Dealer Market Association. That’s the highest level since Jan. 19.

“Regional bonds yield inched up quite a fair bit in reaction to the positive U.S. jobs data,” said Winson Phoon, Kuala Lumpur-based fixed-income analyst at Maybank Investment Bank Bhd.

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