Rupiah Declines Most in a Week Before EU Summit; Bonds Rise

Yudith Ho

Indonesia’s rupiah dropped the most in nearly a week as Europe’s debt crisis damped demand for emerging-market assets. Government bonds rose.    

The currency retreated for a second day after exchange data showed global funds sold $229 million more local stocks than they bought this month through June 22. The Bloomberg-JPMorgan Asia Dollar Index reached a two-week low before European Union leaders hold a two-day summit in Belgium starting June 28 to discuss measures to resolve the region’s debt crisis.   

“The rupiah’s weakening is mostly driven by factors from outside the country, while there is still a lot of need for dollars domestically,” said Gusti Kahari, a Jakarta-based foreign-exchange dealer at Bank Artha Graha Internasional.

“We hope the outcome of the EU summit will be for the longer term and not just a temporary relief.”    

The rupiah weakened 0.7 percent, the most since June 19, to 9,501 per dollar as of 8:59 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency has slumped 4.8 percent this year, the second-worst performance among Asia’s most-traded currencies, after India’s rupee.    

One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 10.5 percent.    
The yield on the government’s benchmark 10-year bonds dropped one basis point, or 0.01 percentage point, to 6.19 percent, according to data compiled by Bloomberg.

The yield has climbed 16 basis points this year after touching a record low of 5.01 percent in February.