Indonesia’s rupiah forwards fell the most in a week and government bonds declined before the US Federal Reserve was to start a meeting yesterday to decide whether to cut stimulus that has buoyed demand for emerging-market assets.
The US central bank will probably reduce its bond buying to US$75 billion a month from US$85 billion, according to a Bloomberg survey this month. Global funds pulled 2.2 trillion rupiah (US$197 million) from local-currency sovereign notes in the month through Friday, finance ministry data show. Bank Indonesia raised its policy rate by 1.5 percentage points in the past three months to help narrow the current-account deficit, which was a record US$9.8 billion in the second quarter.
“The outlook for the rupiah, as with other emerging-market currencies, is really dependent on how much the Fed is going to do,” Singapore-based Australia & New Zealand Banking Group Ltd foreign-exchange strategist Irene Cheung said. “We still need to see an improvement in the external balance numbers.”
Rupiah one-month non-deliverable forwards slid 1 percent to 11,314 per US dollar as of 4pm in Jakarta, the biggest drop since Sept. 5, data compiled by Bloomberg show. The contracts traded 1.2 percent stronger than the spot rate, which fell 0.6 percent to 11,451, according to prices from local banks. The forwards have traded 3.2 percent weaker on average than the spot rate over the past month.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose four basis points, or 0.04 percentage point, to 17.4 percent, data compiled by Bloomberg show. A fixing used to settle the rupiah forwards was set at 11,224 per US dollar yesterday, compared with 11,101 on Monday, according to the Association of Banks in Singapore.
Indonesia’s US$1.5 billion dollar sukuk sale last week was its last global offering this year, although the government is seeking to raise US$500 million of greenback-denominated notes onshore next month, Robert Pakpahan, director-general at the Indonesian Ministry of Finance’s debt management office, said in Jakarta yesterday.
The yield on the 5.625 percent securities due May 2023 rose 13 basis points to 8.16 percent, the biggest increase since Sept. 4.