Indonesia Rate Rise Signals No Current-Account Relief for Rupiah

 Indonesia’s surprise interest-rate increase signals a wider-than-anticipated current account gap that threatens to deepen the rupiah’s three-week plunge, according to United Overseas Bank Ltd. and Barclays Plc.

The rupiah, Asia’s worst performing currency this year, has tumbled 5.7 percent to 11,596 per dollar since trading at a seven-week high Oct. 25. In a move that was predicted by only one of 25 analysts surveyed by Bloomberg, Bank Indonesia raised the reference rate to a four-year high of 7.5 percent yesterday, a day before officials are slated to release third-quarter current account figures.

UOB says the rupiah will weaken to 11,700 per dollar by year-end. Barclays, (BARC) the most accurate rupiah forecaster over the past four quarters, says it will drop to 11,750.

Bank Indonesia, which has raised its policy rate by 1.75 percentage points in the past five months, said yesterday’s increase is aimed at narrowing the current-account gap. The shortfall will be as little as 3.7 percent of gross domestic product in the third quarter from a record 4.4 percent in the previous three months, it estimates. Foreign funds pulled $264 million from Indonesian stocks in November as the improving U.S. economic outlook spurred speculation the Federal Reserve will cut stimulus as soon as this year.

(Source: Bloomberg)

Aussie Falls to Six-Week Low on China Caution, Sagging Sentiment

Australia’s dollar fell to a six-week low as traders weighed prospects for growth in China, the South Pacific nation’s biggest trading partner, before a four-day Communist Party summit ends today.

The currency extended an intraday decline after a report from National Australia Bank Ltd. showed business confidence fell. The Aussie weakened for a third day yesterday after Chinese loan growth slowed more than forecast last month. Australia’s 10-year government bond yields climbed to the highest in more than 1 1/2 years.

Australia’s dollar lost 0.1 percent to 93.50 U.S. cents as of 12:10 p.m. in Sydney after touching 93.37, the weakest since Oct. 2. It had weakened 1.8 percent in the three days through yesterday. New Zealand’s currency was little changed at 82.54 U.S. cents.

Benchmark 10-year bond yields in Australia rose three basis points, or 0.03 percentage point, to 4.26 percent. It earlier touched 4.29 percent, the highest since March 2012.

A sentiment gauge among Australian businesses fell to 5 in October from 12 the prior month, NAB said today. It separately pushed back its forecast for a Reserve Bank of Australia rate cut to May from February, citing a slower increase in unemployment.

Chinese President Xi Jinping and hundreds of top Communist leaders are gathered in Beijing to map out an economic blueprint to sustain growth and drive the urbanization of hundreds of millions of rural residents. A communique will be released after the meeting ends outlining the road map.

New yuan loans grew by 506.1 billion yuan ($83.1 billion) in October, down from a 787 billion yuan increase in the previous month. Analysts forecast a 580 billion yuan gain.

(Source: Bloomberg)

China’s Economic Recovery Gives Boost to Xi Amid Reform Summit

China’s economy entered the final quarter of 2013 with an acceleration in manufacturing and exports, momentum that offered confidence to Communist leaders gathering to determine policy shifts for the coming decade.

Industrial output rose a more-than-estimated 10.3 percent from a year earlier in October and manufacturing investment strengthened, according to data released Nov 9. by the National Bureau of Statistics. Customs data the previous day showed overseas sales rebounded by more forecast.

Failure to implement reforms on issues ranging from interest rates to local government debt and land ownership risks impeding the party’s goals of boosting incomes and spurring hundreds of millions of rural residents to move to the cities. President Xi Jinping and top Communist leaders tomorrow conclude a four-day gathering to map out an economic blueprint for changes that the State Council’s research institute says should include curbing the government’s role in the economy, adjusting the fiscal system and spurring foreign investment.

Standard Chartered last month raised its estimate for China’s 2013 economic growth to 7.6 percent from 7.5 percent and revised next year’s forecast to 7.4 percent from 7.2 percent. The new projections match the median estimates in Bloomberg News surveys in October.

(Source: Bloomberg)