Rupiah Snaps Two-Day Gain on Slower Growth Outlook; Bonds Rally
Indonesia’s rupiah snapped a two-day gain after the central bank cautioned that growth this year may be at the lower range of its forecast. Government bonds advanced.
Bank Indonesia said yesterday economic expansion is at risk of being at the lower end of its 6.3 percent to 6.7 percent estimate after holding its benchmark interest rate at 5.75 percent. The nation had a trade deficit in April, the first since July 2010. The central bank will begin offering dollar term deposits today to increase the local supply of greenbacks and support the rupiah, Hendar, director of monetary policy, said last week.
“Given weaker fundamental support and fragile risk sentiment, the rupiah is likely to underperform regional peers,” said Prakriti Sofat, an economist at Barclays Capital in Singapore, adding that Indonesia’s economy may grow 6.2 percent this year.
The term deposit measure should boost domestic greenback supply but “does not really change the fundamental mismatch between dollar demand and supply,” she said.
The rupiah weakened 0.3 percent to 9,432 per dollar as of 9:30 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. One-month implied volatility, which measures exchange-rate swings used to price options, held at 12.75 percent.
The yield on the government’s benchmark 10-year bonds dropped one basis point, or 0.01 percentage point, to 6.45 percent, data compiled by Bloomberg show.