JAKARTA, Oct 13 — Indonesia’s rupiah fell the most in two months and led declines in Asia on speculation the currency’s surge last week was excessive and not supported by fundamentals.
The rupiah dropped 1.3 per cent, the most since August 12, to 13,578 a dollar as of 10:11am in Jakarta, according to prices from local banks.
The currency is still up 7.8 per cent this month after advancing 9.1 per cent last week in the biggest gain since 2001. The Jakarta Composite Index of shares declined 2.2 per cent, set for the steepest loss in almost three weeks.
The dollar’s 14-day relative-strength index against the rupiah hovered around the 30 level that suggests to some traders the local currency is poised for a reversal.
Federal Reserve Vice Chairman Stanley Fischer said over the weekend that the US economy may be strong enough to merit a rise in borrowing costs this year.
“It can be considered a technical correction,” said Wiling Bolung, head of balance-sheet trading at PT Bank ANZ Indonesia in Jakarta.
“Corporate demand for dollars is still there” and there are now signs the Fed could raise interest rates this year, he said.
Indonesia’s economy is growing at the slowest pace since 2009 and the country has run current-account deficits for 15 consecutive quarters through June amid declines in the prices of its main commodity exports such as coal, palm oil and metals.
A Bloomberg gauge of raw materials prices has dropped 1.2 per cent so far this week after rallying 3.6 per cent last week.
Weakness in the rupiah is a “market correction after its recent sharp rally,” said Tsutomu Soma, manager of the fixed- income business unit at Rakuten Securities Inc. in Tokyo.
There’s been no fundamental changes in Southeast Asia, he said.
Indonesian government bonds advanced, pushing the yield on the 10-year notes down two basis points to 8.58 per cent, according to the Inter Dealer Market Association.
The yield has fallen 102 basis points this month. — Bloomberg
