Patricia Lui

Seven out of 17 Bloomberg analysts have predicted the rupiah could rise to as high as 9,000 against the dollar by the end of 2010. (Reuters Photo)

Worst Week for Rupiah Since June as Obama Bank Plan Rattles Markets

The rupiah posted its biggest weekly slump since June on concern that US plans to curb banks’ trading activities will dampen appetite for riskier assets worldwide. Bonds also declined.

The rupiah was among 24 of 26 major emerging-market currencies that weakened against the dollar this week.

US President Barack Obama on Thursday called for limits on the size and trading activities of financial institutions to prevent another financial crisis.

US stocks tumbled, erasing the Dow Jones Industrial Average’s gain for 2010.

“Currency markets in Asia are tumbling on risk aversion caused by news of Obama’s plans to curb banks trading,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong. “Obama is getting more populist and his move may signal more anti-business policies ahead, which could drag on economic growth and business profits.”

A global quarterly poll of investors and analysts who are Bloomberg subscribers found that 77 percent of US respondents believe that Obama is too anti-business.

The rupiah trimmed gains this year, tumbling 1.6 percent this week to trade at 9,345 to the dollar as of 3:20 p.m. on Friday, according to data compiled by Bloomberg.

The currency was Asia’s best performer last year, rising 16 percent as investors were attracted to its yield and economic growth.

“The Korean won and the Indonesian rupiah are the most volatile of Asian currencies and tend to fall the most during such times of global risk aversion,” Kowalczyk said. “I still think this is a good buying opportunity.”

Indonesian government bonds also declined this week. The yield on the 11 percent note due November 2020 rose 17 basis points to 9.71 percent from 9.54 percent on Jan. 15, according to midday prices at the Inter Dealer Market Association. The price slid 1.2557, or Rp 12,557 per Rp 1 million face amount, to 108.4670.

Local-currency bonds have handed investors a return of 2.8 percent this year, retaining last year’s rank as the best performer among the 10 local-currency debt indexes compiled by HSBC.

The government plans to sell Rp 3 trillion ($321 million) of Islamic bonds to retail investors on Feb. 10. The notes, maturing Feb. 10, 2013, will be on offer from Jan. 25 to Feb. 5.



Bloomberg

Your View

See Result