Indonesia’s rupiah fell to a four- year low, stocks dropped by the most in 22 months and government bonds plunged after the nation’s current-account deficit widened to a record last quarter.
The yield on 10-year notes surged to the highest since March 2011 after Bank Indonesia said late Aug. 16 the current- account shortfall was $9.8 billion, the largest in data compiled by Bloomberg going back to 1989.
The Jakarta Composite Index of shares has fallen 6 percent in two days after overseas investors pulled $132 million from local equities last week, exchange data show. Inflation quickened to a four-year high and economic growth slowed to the least since 2010, figures showed last week.
“Indonesia has seen a gradual but persistent bout of bad news, with slowing growth, quickening inflation and then the current-account deficit,” said Leo Rinaldy, a Jakarta-based economist at Mandiri Sekuritas, a unit of the nation’s largest lender.
“The implication going forward is that demand for dollars will increase.”
The rupiah slid 1 percent to 10,493 per dollar as of 12:17 p.m. in Jakarta, the weakest level since June 2009, according to prices from local banks.
That was the biggest drop since July 23, extending the decline this quarter to 5.4 percent, the worst performance among Asia’s 11 most-traded currencies.
The Jakarta Composite index of shares fell 3.9 percent to 4392.475, the biggest drop since Oct. 3, 2011.
Telekomunikasi Indonesia declined 5.7 percent and Bank Rakyat Indonesia, the second-largest lender by assets, fell 6.4 percent.
“This is all because of the current-account deficit data,” John Rachmat, head of equities research and strategy at Mandiri Sekuritas in Jakarta.
“Once the rupiah is considered cheap, capital inflows could start coming back. Right now foreign investors, especially portfolio investors, are worried about investing in Indonesia.”
The current account has remained in deficit for seven quarters and overseas sales decreased for a 15th month in June, driven by declines in prices for Indonesia’s key commodity exports.
Coal fell 32 percent since the end of 2011, while palm oil slid 26 percent.
Bank Indonesia’s policy is to manage the currency’s depreciation to support overseas shipments, Edward Teather, a Singapore-based economist at UBS AG, wrote in an Aug. 15 research note.
Consumer prices increased 8.6 percent last month from a year earlier, and growth slowed to 5.8 percent in the second quarter, official data showed last week.
Bank Indonesia left its benchmark interest rate at 6.5 percent on Aug. 15 after increasing it by 75 basis points over the previous two meetings.
“The market took the view that Bank Indonesia wasn’t that concerned about the weakness of the currency,” Robert Prior- Wandesforde, an economist at Credit Suisse Group AG in Singapore, wrote in a research note on Monday, referring to the central bank’s decision to leave borrowing costs unchanged.
“The good news is that we suspect the second-quarter current-account deficit represents the peak, albeit because deteriorating domestic demand depresses imports further.”
The yield on government bonds due May 2023 climbed for a sixth consecutive day, rising 21 basis points, or 0.21 percentage point, to 8.4 percent, the highest level since March 2011, prices from the Inter Dealer Market Association show.
The rupiah spot rate traded at a 1.9 percent premium to the one-month non-deliverable forwards, which fell 1.1 percent to 10,691 on Aug. 16, the last available price.
A fixing by the Association of Banks in Singapore used to settle the derivative contracts was set at 10,499 on Monday.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 1.21 percentage points to 12.98 percent, according to data compiled by Bloomberg.
Most Asian currencies fell on Monday on speculation a reduction in Federal Reserve stimulus that has driven fund flows to emerging markets is imminent.
“Rupiah depreciation today is in line with regional currency movements,” Bank Indonesia Deputy Governor Perry Warjiyo said in a mobile-phone text message, adding that the central bank will remain in the market to stabilize the currency.