Indonesian Rupiah Halts Declines After Investors Rush to Cash from its Drop

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Indonesian Rupiah Halts Declines After Investors Rush to Cash from its DropThe Indonesian rupiah halted a three-day losing streak after investors rushed to purchase assets expressed in the currency in order to benefit from its recent decline.

The rupiah rose 0.4 percent to 11,696 per dollar at the close of trade in Jakarta, after earlier retreating 1.4 percent over the past three days. The currency had earlier touched 11,833, its lowest level since July 7 following a congressional testimony by Federal Reserve Chair Janet Yellen, who said the U.S. interest rates may be increased sooner than projected if the slack in the labor market is utilized.

“Investors are buying into the weakness after recent declines,” Dini Agmivia Anggraeni, a Jakarta-based fixed-income analyst at PT Maybank Kim Eng Securities told Bloomberg. “Even after the final results are announced, there’s still potential for legal appeals so the political uncertainty may continue.”

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The rupiah’s one-month implied volatility, which measures the expected swings in the exchange rate that is used to value options, plunged 20 basis points to 10.90 percent. The yield on Indonesia 8.375 percent government bonds that mature on March 2024 plunged 0.01 percentage point or one basis point to 8.15 percent, based on Inter Dealer Market Association data.

Former Jakarta Governor Joko Widodo, who is popularly known as Jokowi, has garnered 52.9 percent of the votes cast, with 96.6 percent of the ballots already counted, data by volunteer-backed website Kawalpemilu.org shows. Official results of the election are expected to be released on July 22.

The rupiah recently surged after opinion polls indicated that Widodo was the frontrunner, as investors expressed optimism that he will replicate countrywide the economic success witnessed in Jakarta during his term. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com