Rupiah set for biggest weekly loss since 2013 on growth outlook

[JAKARTA] The rupiah headed for its steepest weekly drop in almost two years as foreign funds pulled money from stocks amid a worsening growth outlook for Indonesia and signs the US will raise interest rates in 2015.

The Indonesian currency slid 2.1 per cent, the most since November 2013, to 14,690 a dollar as of 9:46 am in Jakarta, prices from local banks show. It fell 0.3 percent on Friday and reached 14,710 earlier, the weakest level since July 1998. Financial markets were closed on Thursday for a public holiday. The rupiah is down 9.2 per cent this quarter in the worst performance in Asia after Malaysia's ringgit.

Overseas investors pulled US$104 million from Indonesian shares in the three days through Wednesday, set for an 11th week of outflows, exchange data show. Parliament's finance commission cut the growth estimate in the 2016 budget to 5.3 per cent, from 5.5 per cent, on Tuesday. A gauge of dollar strength rose to near a six-month high after Federal Reserve Chair Janet Yellen said on Thursday that raising interest rates in 2015 "will likely be appropriate." "We're seeing persistent outflows from the stock market as growth is expected to remain quite soft," said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd in Singapore. "What would turn the flows around is if we see firm initiatives from the government to boost growth." The economy can still expand by as much as 5 percent this year, Finance Minister Bambang Brodjonegoro said Sept 21, adding that the government has only met 60 per cent of its spending target for 2015. Gross domestic product increased 4.67 per cent in the second quarter from a year earlier, the least since 2009.

Sovereign bonds fell this week, pushing the yield on the notes due September 2026 up 51 basis points to 9.52 per cent, Inter Dealer Market Association prices show. That's the biggest weekly increase since January 2014 and just one basis point shy of the highest level since March 2010.

BLOOMBERG