SINGAPORE/JAKARTA: The Indonesian rupiah fell to its lowest level since August 1998 on Monday and shares dropped, which market participants said reflected pressure from declining risk appetites and possible selling of the currency by overseas investors.
At 0410 GMT, the rupiah was at 12,685, its lowest since August 1998, according to Reuters data. At that level, the currency was down 1.9 percent on the day and 4.3 percent this year.
"The US continues to post positive economic data which in turn hit the rupiah," said Royke Tumilaar, head of treasury at Bank Mandiri, the largest Indonesian bank by assets. "High foreign ownership in our capital markets makes us really exposed to a strengthening dollar," he added.
The yield of the 10-year government bond rose to 8.203 percent on Monday, from 8.087 percent on Friday.
RECENT OUTFLOW
The stock market was down 0.9 percent to its lowest in nearly three weeks.
For the year, the benchmark index is up nearly 20 percent. Data from Indonesia's Finance Ministry shows an outflow of 11 trillion rupiah ($869.22 million) between Dec. 1 and Dec. 11.
During that period, foreign ownership of total tradable bonds fell to 38.6 percent from 39.5 percent.
Indonesia's credit default swaps has been a major underperformer on Monday.
The 5-year contract or the cost of insuring sovereign debt for 5 years rose 10 basis points (bps) to 165/175 basis points (bps) compared with the broad market index which widened by 6 bps. Other sovereign CDS added 3-7 bps. Earlier, Indonesia's central bank said it was acting in the foreign exchange market to smooth out volatility of the rupiah against the dollar.
Moves in rupiah's non-deliverable forwards since around Friday suggest that selling by overseas investors is behind the rupiah's latest drop, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore. "There are some visible signs of currency hedging against rupiah weaknessby overseas investors," Okagawa said.
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