Rupiah Falls as Companies Take Advantage of Rally to Buy Dollars

December 4, 2013 Leave a comment

Rupiah Falls as Companies Take Advantage of Rally to Buy Dollars

Indonesia’s rupiah declined on speculation local companies are taking advantage of yesterday’s biggest rally since September to buy dollars at a more favorable exchange rate. The rupiah surged 1.6 percent yesterday after official data showed the trade balance swung to a $42.4 million surplus in October, compared with the $775 million deficit estimated by economists surveyed by Bloomberg. A report showed yesterday that the U.S. Institute for Supply Management’s factory index climbed to the highest in more than two years, boosting prospects the Federal Reserve will start paring its monetary stimulus.“Demand for dollars is still there so companies will buy whenever they can,” said Billie Fuliangsahar, Jakarta-based head of treasury at PT Rabobank International Indonesia. “The trade data shows progress in narrowing the current-account gap, so the rupiah can strengthen unless the Fed starts tapering.”

The currency dropped 0.6 percent to 11,840 per dollar as of 9:28 a.m. in Jakarta, according to prices from local banks. In the offshore market, one-month non-deliverable forwards declined 0.5 percent to 11,855, trading 0.1 percent weaker than the onshore spot rate, data compiled by Bloomberg show.

The government is due to sell 4 trillion rupiah ($338 million) of debt today in its last scheduled auction for this year. The yield on the 5.625 percent sovereign bonds due May 2023 was little changed at 8.63 percent, prices from the Inter Dealer Market Association show.

One-month implied volatility in the rupiah, a measure of expected moves in the exchange rate used to price options, fell one basis point, or 0.01 percentage point, to 14.66 percent.

A daily fixing used to settle the rupiah forwards was set at 11,721 per dollar yesterday by the Association of Banks in Singapore. Today’s rate will be published at 10:30 a.m. in Jakarta.

To contact the reporter on this story: Yudith Ho in Jakarta at yho35@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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