Selloff in Indonesia Currency, Bonds Deepen Before Rate Decision

 

Indonesian currency tumbled to a 31-month low and bonds fell for a second day as foreign investors dumped the nation’s assets after a spike in benchmark U.S. yields. Stocks snapped a two-day decline.

The rupiah slumped to as low as 14,114 to a dollar, the weakest level since October 2015, before closing at 14,093, while the yield on benchmark 10-year government bonds rose 12 basis points to 7.217 percent. The benchmark Jakarta Composite Index ended 0.1 percent higher, reversing a 1.7 percent intraday decline.

A fresh wave of risk aversion is spreading across Asia as investors grapple with rising Treasury yields and a strong dollar amid lingering trade, growth and geopolitical worries. That’s adding pressure on Bank Indonesia to increase interest rates on Thursday as it seeks to stem the sell-off that’s made the nation’s currency and stocks among the worst performers in Asia. A series of terror attacks this week have further soared investor sentiment.

Indonesian currency tumbled to a 31-month low and bonds fell for a second day as foreign investors dumped the nation’s assets after a spike in benchmark U.S. yields. Stocks snapped a two-day decline.

The rupiah slumped to as low as 14,114 to a dollar, the weakest level since October 2015, before closing at 14,093, while the yield on benchmark 10-year government bonds rose 12 basis points to 7.217 percent. The benchmark Jakarta Composite Index ended 0.1 percent higher, reversing a 1.7 percent intraday decline.

A fresh wave of risk aversion is spreading across Asia as investors grapple with rising Treasury yields and a strong dollar amid lingering trade, growth and geopolitical worries. That’s adding pressure on Bank Indonesia to increase interest rates on Thursday as it seeks to stem the sell-off that’s made the nation’s currency and stocks among the worst performers in Asia. A series of terror attacks this week have further soared investor sentiment.

The selloff also spread to dollar bonds from Indonesian issuers after the nation posted the biggest trade deficit in four years on Tuesday, fueling speculation the local currency will weaken further and push up servicing costs on international debt.

“Indonesia’s trade deficit number yesterday was much weaker than expected and the rupiah reacted to that,” said Bharat Shettigar, head of Asia ex-China corporate credit research at Standard Chartered Bank. “That places pressure on the central bank to hike rates in tomorrow’s policy meeting.”

Source: Bloomberg

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