http://www.thejakartaglobe.com/business/rupiah-forwards-decline-on-concern-fed-will-scale-back-stimulus/568130?utm_source=newsletter&utm_medium=email&utm_campaign=jgnewsletter
Rupiah Forwards Decline on Concern Fed Will Scale Back Stimulus January 28, 2013 Indonesia’s rupiah forwards fell for a fourth day on speculation a pickup in the US economy will prompt the Federal Reserve to scale back pro-growth policies that have spurred fund flows into emerging markets. The Bloomberg-JPMorgan Asia Dollar Index traded near a one- month low before a report that economists predict will show demand for durable goods rose the most in three months in the world’s largest economy. Global funds pulled Rp 730 billion ($75 million) from their holdings of local-currency government debt this month through Jan. 23, according to the latest data from the finance ministry. “The forwards purely reflect overseas investors’ sentiment on the rupiah,” said Fahrudin Haris Prastowo, a foreign-exchange trader at Bank Rakyat Indonesia in Jakarta. “Economic recovery in the US would increase the likelihood that the Fed will halt its stimulus at the end of the year.” The currency’s one-month non-deliverable forwards weakened 0.2 percent to 9,822 per dollar as of 9:40 a.m. in Jakarta, data compiled by Bloomberg show. That’s 1.5 percent cheaper than the spot rate, which fell 0.2 percent to 9,670, prices from local banks compiled by Bloomberg show. A daily fixing used to settle the derivative contracts was set at 9,766 on Jan. 25 by the Association of Banks in Singapore. One-month implied volatility in the rupiah, which measures expected moves in exchange rates used to price options, rose 13 basis points, or 0.13 percentage point, to 6.38 percent. Fed Outlook Minutes of the Fed’s December meeting, released earlier this month, indicated that officials began debating an end to their unprecedented bond-buying program as early as this year. The central bank has already scooped up $2.3 trillion of Treasuries and mortgage-related bonds since 2008 in two rounds of quantitative easing that tended to debase the US currency. Fed officials begin a two-day policy meeting tomorrow. Bank Indonesia will intervene in the currency market to reduce the gap between dollar supply and demand, Deputy Governor Hartadi Sarwono told reporters in Jakarta on Jan. 25. The yield on the 5.625 percent government bonds due May 2023 dropped three basis points to 5.17 percent in Jakarta, the lowest level since Jan. 9, according to prices from the Inter Dealer Market Association. Bloomberg [Non-text portions of this message have been removed]
