(Bloomberg) -- Indonesia’s rupiah weakened for a fourth day, the longest stretch since November, on concern the global economic slump will be deeper than previously thought, damping demand for the nation’s assets. Bonds dropped.
The rupiah is set for its biggest weekly loss in almost three months as exchange data showed overseas investors sold $72 million more local shares than they bought this week. The International Monetary Fund said in a forecast released yesterday that the world economy will shrink 1.3 percent this year, compared with a January projection for 0.5 percent growth. The currency had advanced in the prior six weeks.
“The recent rally in the rupiah has been a little too stretched,” said Gundy Cahyadi, an economist at IDEAglobal in Singapore. “The stock market has been correcting. The IMF is announcing the recession could go longer. People are questioning their optimism in the past two to three weeks.”
The rupiah dropped 0.3 percent to 10,923 per dollar as of 5:21 p.m. in Jakarta, according to data compiled by Bloomberg. The currency has lost 1.8 percent this week. It reached 10,660 on April 16, the highest level since Dec. 18.
Growth in Indonesia, Southeast Asia’s largest economy, will slow to 2.5 percent this year, from 6.1 percent in 2008, according to the IMF report.
The Jakarta Composite Index of shares slid 1.4 percent today, extending its loss to 2.5 percent this week.
Bonds Decline
Non-deliverable forwards contracts signal traders are betting the rupiah will weaken 0.1 percent to 10,935 per dollar in a month, after indicating a rate of 10,975 yesterday. Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.
Five-year government bonds slipped for the third time this week on concern losses in the currency will erode the fixed payments from the securities.
“Bond prices were mirroring what’s going on with the currency,” said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta.
The yield on the 11.25 percent security due May 2014 rose three basis points to 10.98 percent, according to closing prices from the Inter Dealer Market Association. The price declined 0.1296, or 1,296 rupiah per 1 million rupiah face amount, to 101.01.
Inflation will slow in April, central bank Senior Deputy Governor Miranda Goeltom told reporters in Jakarta today. Bank Indonesia cut borrowing costs for a fifth month on April 3 to 7.5 percent after inflation cooled to 7.9 percent in March, the slowest in a year.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.
