Rupiah Drops Most Since August This Week on Domestic Dollar Demand

By webadmin on 12:52 pm Sep 21, 2012
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Indonesia’s rupiah completed
its biggest weekly loss since August on speculation importers stepped
up dollar purchases after the Federal Reserve’s announcement of
more quantitative easing drove the local currency to a seven-week
high. Government bonds dropped.

The Federal Reserve announced on
Sept. 13 open-ended buying of $40 billion of mortgage debt a month to
hold borrowing costs down, a move that boosts the supply of dollars.

The rupiah touched 9,447 versus
the greenback on Sept. 17, the strongest level since Aug. 1, before
retreating on each of the subsequent three days.

The rupiah fell 0.5 percent this
week to 9,548 per dollar as of 4:11 p.m. in Jakarta on Friday, the most since
the five days ended Aug. 31, prices from local banks compiled by
Bloomberg show.

The currency advanced 0.1 percent on Friday and reached 9,609 before the Fed’s announcement on Sept. 13,
the weakest level since May.

The rupiah halted its rally as
the QE effect recedes,” said Putu Andi Wijaya, a foreign-exchange
dealer at PT Bank Rakyat Indonesia in Jakarta. “Corporates take any
opportunity to buy dollars whenever the rupiah reaches a good level.”

The local currency’s one-month
implied volatility, which measures exchange-rate swings used to price
options, held at 5 percent this week, the lowest level since
September 2008, data compiled by Bloomberg show.

The yield on the government’s 7
percent notes due May 2022 climbed six basis points this week, or
0.06 percentage point, to 5.96 percent, closing prices from the Inter
Dealer Market Association show. The yield rose three basis points on Friday.