A clerk displays Indonesian 50,000 rupiah banknotes for a photograph at a currency exchange office in Jakarta, Indonesia. (Photographer: Dimas Ardian/Bloomberg)

Rupiah Slips Most in Eight Months to Lead Emerging-Asia Sell-Off

(Bloomberg) -- The rupiah slid the most in eight months, leading losses among Asia’s emerging-market currencies, amid rising concern global growth is slowing. Indonesia’s central bank said it intervened to limit a sell-off in the currency and local bonds.

The rupiah tumbled as much as 1.4 percent, the biggest intraday drop since June, to hit a two-month low of 14,335 per dollar. Yields on Indonesia’s 10-year bonds climbed seven basis points to 7.96 percent.

Emerging-market assets fell across the board in Asian trading after the European Central Bank cut growth forecasts Thursday, and China’s export data released Friday was worse than economists estimated. The risk-off sentiment is bolstering the dollar and pushing down the rupiah, Bank Indonesia said.

Rupiah Slips Most in Eight Months to Lead Emerging-Asia Sell-Off

“A synchronized decline for the Asian markets is expected into the end of the week, underpinned by the gathering of growth concerns seemingly manifesting across all regions,” said Jingyi Pan, market strategist at IG Asia Pte in Singapore.

Mounting global worries have punished emerging-market assets in recent weeks, seemingly drawing an end to a rally that started in December amid signs the Federal Reserve was turning dovish. Optimism is turning to caution as central banks from Europe to Australia follow the Fed’s tilt, fueling fresh jitters about the outlook for growth.

The rupiah’s decline is also “a bit of unwinding of a carry trade that’s happening right now across EM high yielders as a result of the risk-off situation,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “It’s more of a broad risk-off situation, moving on from what happened overnight, in terms of how the market interpreted the ECB move.”

Bank Indonesia will remain in the market to stabilize the rupiah, Governor Perry Warjiyo said. The central bank will buy a “large amount” of government bonds, said Nanang Hendarsah, executive director for monetary management.

Below are some more comments from market analysts on the sell-off.

Marcus Wong, strategist at CIMB Bank Bhd. in Singapore:

  • Yesterday’s dovish ECB decision has no doubt provided further propulsion for the dollar in the near-term, with EM currencies potentially in the crosshairs
  • As the bellwether for EM sentiment, we may see some further rupiah weakness, though we do not expect to see” anything close to the EM rout seen in September or October 2018
  • As long as U.S. Treasury yields remain range-bound around these levels, we expect foreign flows to remain in the EM Asia region

Sim Moh Siong of BOS:

  • The rupiah’s weakness “warrants a caution” even as it isn’t too dramatic
  • We are waiting for new catalysts to drive the market. Right now, it’s bit of a vacuum and we won’t get any news till the meeting between Trump and Xi on trade
  • Data meanwhile continue to point towards softening of global growth. So, I guess we are in a period of wait and worry

Ha Keon-hyeong, economist at Shinhan Investment Corp. in Seoul:

  • Concerns over Indonesia’s fiscal policy and upcoming presidential election, combined with the fear of global economic slowdown, are weighing harder on the rupiah compared to other emerging currencies
  • Emerging currencies may get some support to strengthen in 3Q when the global economy is expected to rebound
  • Signs of economic upturn will probably start to show in the middle to end of 2Q

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