Lilian Karunungan – Indonesia's rupiah fell, approaching a seven-year low, as slides in global stocks fanned concern investors' risk appetite is dwindling, curbing demand for emerging-market assets. Government bonds declined.
The rupiah is this month's biggest loser against the dollar among Asia's 10 most-active currencies excluding the yen and Bank Indonesia yesterday announced restrictions on foreign-exchange purchases to stem the decline. Planning Minister Paskah Suzetta said today Indonesia doesn't need to tap the International Monetary Fund's short-term lending facility.
"Regional sentiment is still going south," said Joanna Tan, an economist at Forecast Pte in Singapore. "Equities are still looking quite weak. We would see the downside in the rupiah somewhat capped because of the measures imposed."
The rupiah reached 11,998 per dollar, the lowest since 2001, before trading at 11,800 as of 4:49 p.m. in Jakarta, from 11,575 yesterday. The currency has tumbled 7 percent this month, according to data compiled by Bloomberg.
The MSCI Asia-Pacific Index of shares dropped 4.9 percent today and the Jakarta Composite Index fell 5 percent.
Senior Deputy Governor Miranda Goeltom said yesterday Indonesia's central bank will require companies and individuals based in the nation to seek approval for foreign-exchange purchases of more than $100,000, a move designed to help check the rupiah's slide. Buyers will have to show that they are purchasing foreign currency to settle an underlying transaction, such as paying for imports.
Central bank intervention
Stewart Newnham, an analyst at Morgan Stanley in Hong Kong, said the new regulation was unlikely to stabilize the rupiah.
"These measures will amount to no more than increased administrative costs in rupiah transactions, reflected in wider bid and offer spreads, and thinner liquidity," he wrote in a note today. "The increased risk of capital controls is likely to deter capital inflows and expedite capital flight."
The central bank sold dollars today, according to Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. Policy makers intervene in currency markets by arranging sales and purchases of foreign exchange.
Indonesia's foreign-exchange reserves dropped to $50.58 billion in October from $57.11 billion in late September as Bank Indonesia used the funds to help support the rupiah.
The rupiah will fall to its lowest since 1998 in the next three months as the drop in reserves limits central bank intervention, according to Credit Suisse Group AG. The currency will slide 5.6 percent to 12,500 per dollar as exports slump, Switzerland's second-biggest bank said in a report sent to clients today.
Bonds fall
The seven-year government bond fell for a second day on concern a weaker rupiah will prompt overseas investors to cut their holdings of the securities.
"The weakening of the rupiah has accelerated, this is putting downward pressure on bond prices," said Henry Surya, who helps oversee the equivalent of $361 million as a fund manager and fixed-income analyst at PT Danareksa Investment Management in Jakarta.
The yield on the 9.5 percent note due June 2015 rose 16 basis points to 15.03 percent, according to closing prices at the Inter Dealer Market Association. The price fell0.5244, or 5,244 rupiah per 1 million rupiah face amount, to 77.3672. A basis point is 0.01 percentage point.