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Currency Hedge Catch-22 Confounds Indonesia as Rupiah Swings

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Indonesian companies encouraged to protect themselves against swings in the rupiah are being presented with a dilemma, as the instability that makes it Asia’s most volatile currency also ensures it’s the most expensive to hedge.

The rupiah’s one-month onshore implied yield, a gauge of expected interest rates and fluctuations used to price the forwards that companies use to hedge against exchange-rate losses, rose to 13.05 percent April 9, the highest level since 2010, before slipping back to 8.76 percent on Monday, according to data compiled by Bloomberg. That compares with 3.54 percent for Malaysia’s ringgit and 2.51 percent for the Philippine peso.