Rupiah Drops After Foreigners Pull Funds From Stocks on Europe

Yudith Ho

Indonesia’s rupiah dropped by the most in a week after foreign funds pulled money from the nation’s shares amid concern Europe’s debt crisis is worsening. Government bonds declined.    

Overseas investors sold $21 million more local stocks than they bought yesterday, following net sales of $49 million on June 22, exchange data show. Moody’s Investors Service downgraded 28 Spanish banks yesterday, while German Chancellor Angela Merkel said proposals for joint bond sales and deposit insurance from the euro-area are “economically wrong and counterproductive.”    

“The rupiah is following the news direction from Europe these days,” said Wiwig Santoso, the Jakarta-based head of treasury and markets at PT DBS Bank Indonesia.    

The rupiah weakened 0.6 percent to 9,501 per dollar as of 10:28 a.m. in Jakarta, the most since June 19, prices from local banks compiled by Bloomberg show.

The currency is poised for its worst quarter since the first three months of 2009, falling 3.5 percent since March 30 and 4.6 percent this year. One-month implied volatility, which measures exchange-rate swings used to price options, held at 10.5 percent.    

Indonesia plans to raise 1 trillion rupiah ($105 million) from a sale of Islamic bonds today, according to a statement on the debt management office’s website.    

The yield on the government’s benchmark 10-year notes rose two basis points, or 0.02 percentage point, to 6.26 percent, according to data compiled by Bloomberg. The yield climbed 34 basis points from the end of March and 24 basis points this year.

Bloomberg