Indonesian Rupiah Gains a Second Day on Intervention Speculation

By Andrew Janes and Lilian Karunungan  

Indonesia’s rupiah rose for a second day, rising from near the weakest level in 16 years, on speculation the central bank intervened to curb losses in the currency.
Overseas investors have sold a net 13.03 trillion rupiah ($1.03 billion) of local-currency sovereign bonds and $337 million of stocks this month as they prepare for higher U.S. interest rates next year. The Federal Open Market Committee ends a two-day meeting today at which the path of increases in borrowing costs will be discussed.
The rupiah gained 0.2 percent to 12,658 per dollar as of 4:49 p.m. in Jakarta after falling as much as 0.7 percent earlier today, according to prices from local banks compiled by Bloomberg. It finished at 12,698 on Dec. 15, the lowest close since 1998. One-month implied volatility, a measure of expected exchange-rate swings used to price options, rose 40 basis points to 15.07 percent, the highest since January.
“Most currencies, including the rupiah, are jittery about the FOMC meeting,” said Leo Rinaldy, a Jakarta-based economist at PT Mandiri Sekuritas, a unit of the country’s largest lender by assets. “I believe Bank Indonesia will step in if rupiah volatility is quite high.”
Bank Indonesia is intervening to stabilize the rupiah and is also buying government bonds in the secondary market, Deputy Governor Perry Warjiyo told reporters yesterday.
Monetary authorities come into the market when they see there is imbalance between supply and demand, “but I don’t think they are stopping the move or aiming at a certain level,” Wiling Bolung, head of balance-sheet trading in Jakarta at PT Bank ANZ Indonesia, said in an interview;
In the offshore market, one-month non-deliverable forwards jumped 1 percent to 12,858 a dollar, data compiled by Bloomberg show. Bank Indonesia set a fixing used to settle the contracts at 12,720 today, 1.4 percent higher than yesterday’s 12,900, the weakest since the rate was introduced in May 2013.
The yield on Indonesia’s sovereign bonds due March 2024 fell four basis points, or 0.04 percentage point, to 8.41 percent, according to the Inter Dealer Market Association. The yield has increased 71 basis points this month.