Indonesia's rupiah fell to 10,500 per dollar for the first time since 2009, stocks dropped by the most in 22 months and government bonds plunged after the current-account deficit widened to a record last quarter.
The Jakarta Composite Index of shares has fallen 8 percent in two days, and is now the world's worst performer this quarter. The yield on 10-year notes surged to the highest since March 2011 after Bank Indonesia said late Aug. 16 the current-account shortfall was $9.8 billion, the largest in data compiled by Bloomberg going back to 1989. Inflation quickened to a four-year high and economic growth slowed to the least since 2010, figures showed last week.
“Indonesia has seen a gradual but persistent bout of bad news, with slowing growth, quickening inflation and then the current-account deficit,” said Leo Rinaldy, a Jakarta-based economist at PT Mandiri Sekuritas, a unit of the nation's largest lender by assets. “The implication going forward is that demand for dollars will increase.”
The rupiah slid 1 percent to 10,490 per dollar as of 4 p.m. in Jakarta, the biggest drop since July 23, according to prices from local banks. It touched 10,500 earlier and has declined 5.4 percent this quarter, the worst performance among Asia's 11 most-traded currencies.
Eoin Treacy's view Current
account deficits are coming in for greater scrutiny right across the emerging
markets as the prospect of a reduction in the availability of credit is considered
by global investors. The Indian Rupee, Brazilian Real and Indonesian
Rupiah all share this characteristic as they experience selling pressure.
The Jakarta Composite Index was among the first to bottom in 2008, broke out of its base when Wall Street was bottoming, hit new all-time highs as early as 2010 and posted a medium-term peak in May. It pulled back sharply and ranged in the region of the 200-day MA from June. Today's downward dynamic reasserts supply dominance and a sustained move back above the 200-day MA will be required to question potential for a further test of underlying trading.
The fact that leaders within what has been a bullish environment since late 2008 are now beginning to deteriorate can be viewed as a warning for the sustainability of historically high prices in more developed markets.