Rupiah at 17-year low as trade data suggest slowdown worsening

[JAKARTA] The rupiah fell to a 17-year low as trade figures trailed forecasts, suggesting Indonesia's economic slowdown is worsening.

Exports declined 19.2 per cent in July from a year earlier, the biggest drop since August 2012, the Finance Ministry reported Tuesday. A 28.4 per cent plunge in imports resulted in a US$1.3 billion trade surplus. The figures don't bode well for a pickup in growth this quarter after expansion slowed to the least since 2009 in the previous three months.

"On the trade front, they were bad numbers and growth continues to be a big concern," said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd in Singapore. This adds to a weakening bias for the rupiah that is already being harmed by the stronger dollar and the yuan's devaluation, she said.

The rupiah declined 0.4 per cent to 13,846 a dollar as of 11:55 am in Jakarta, according to prices from local banks. It fell as low as 13,851, the weakest level since July 1998, taking its drop this year to 10.5 per cent.

The plunge in exports and imports compared with the median estimate for declines of 8.75 per cent and 13.25 per cent, respectively, in a Bloomberg survey. The trade surplus was the widest since December 2013.

"The main implication is that it suggests Bank Indonesia will no longer be too occupied with the current-account deficit problem," said Gundy Cahyadi, a Singapore based economist at DBS Group Holdings Ltd, adding that he sees no change to the central bank's policy rate "for the time being." Bank Indonesia will review its benchmark interest rate later on Tuesday afternoon. All 17 analysts surveyed by Bloomberg expect the rate to be held at 7.5 per cent.

The yield on the sovereign bonds due September 2026 rose two basis points to 8.69 per cent, according to Inter Dealer Market Association prices.

BLOOMBERG