Rupiah Drops to Four-Month Low as Central Bank Helps Exports

Indonesia’s rupiah fell to the lowest level since February after the central bank said it will allow weakness in the currency to help exports.

Bank Indonesia is letting the rupiah be temporarily “undervalued” to improve the competitiveness of the nation’s shipments and to reduce imports, Senior Deputy Governor Mirza Adityaswara said in Jakarta yesterday. The trade shortfall widened to $1.96 billion in April, the largest since July last year. That weighs on the current-account deficit, which is set to expand this quarter from the 2.06 percent of gross domestic product recorded in the first three months of the year.

The currency fell 0.5 percent to 12,043 per dollar as of 9:44 a.m. in Jakarta, prices from local banks show. It reached 12,048 earlier, the lowest level since Feb. 13. In the offshore market, one-month non-deliverable forwards declined 0.5 percent to 12,106, trading 0.5 percent weaker than the onshore spot rate, data compiled by Bloomberg show.

Spending typically rises during the Muslim fasting month of Ramadan, which will start in late June, while Indonesians head to polls on July 9 to choose a president. Oil prices have climbed this month as militants captured territory in Iraq, the Organization of the Petroleum Exporting Countries’ second-largest producer.

The rupiah’s one-month implied volatility, a measure of expected swings in the exchange rate used to price options, rose five basis points to 9.99 percent. Bank Indonesia set a fixing used to settle rupiah forwards at 23,027 per dollar today, from 12,000 yesterday.

The government’s 8.375 percent bonds due March 2024 declined for the fourth straight day, pushing the yield one basis point, or 0.01 percentage point, higher to 8.20 percent, according to the Inter Dealer Market Association. That’s the highest level since March 26

Singapore to Require Banks to Hold Liquid Assets for Crises

Banks in Singapore will soon be required to keep certain amounts of easy-to-sell assets on hand in the country to support themselves in times of stress.

The new liquidity framework applies to lenders with a “significant retail presence” in the country and covers all currencies, Lim Hng Kiang, the deputy chairman of the Monetary Authority of Singapore, or MAS, said in a speech last night. Banks will also need to hold liquid Singapore dollar assets separately to manage their liabilities in the local currency.

The so-called liquidity coverage ratio is part of an overhaul of banking standards by the Group of 20 nations in response to the financial crisis that followed Lehman Brothers Holdings Inc.’s 2008 collapse. MAS’s proposal comes six months after it warned that rising global interest rates could weigh on household and corporate debt and pose risks for banks.

The requirement for overseas currency exposures “is going to be a huge challenge for banks in Singapore, which is a major foreign-exchange center and where the local economy is not the lion’s share of the business,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., said by phone today. “It may be fine for banks in Ohio because there’s no foreign exposure, but not in Singapore.”

Under the global rules formulated by the Basel Committee on Banking Supervision, banks must have enough assets on their books that they can sell to survive a 30-day funding squeeze. The regulations, which allow assets ranging from cash and central bank reserves to government bonds and some corporate debt, are set to be phased in from next year.

Foreign banks will need a Singapore dollar liquidity coverage ratio of 100 percent, Lim said, meaning they would have to hold enough high-quality, liquid assets to match net cash outflows during a month of stress. He didn’t specify a deadline for meeting the requirement.
The coverage for other currencies will be 50 percent as their head offices are probably subject to similar ratios, he said. Citigroup Inc. (C), HSBC Holdings Plc and Standard Chartered Plc (STAN) are among foreign banks operating in the country.

For such firms, “while MAS recognizes that there may be cost efficiencies in managing liquidity centrally at the group level, there can be significant obstacles to the free movement of liquidity across borders during a stress scenario,” said Lim, who is also the minister for trade and industry.

MAS will consider a bank as having a significant retail presence if its share of resident customer deposits exceeds 3 percent, and if it has more than 150,000 depositors with balances of as much as S$250,000 ($200,000).

For the country’s three local banks -- DBS Group Holdings Ltd. (DBS), Oversea-Chinese Banking Corp. (OCBC) and United Overseas Bank Ltd. (UOB) -- the requirement for a 100 percent Singapore dollar liquidity coverage ratio will be set for the start of 2015, Lim said. Coverage for other currencies is set at 60 percent from 2015, increasing to 100 percent by 2019, he said.

OCBC already complies with the liquidity framework for 2015 and DBS is “comfortable” with the requirements as they’re in line with Basel III rules, the banks said in separate statements.

Despite country's spending, forecast GDP brought down to 1.5.

Brazilian swap rates declined to a seven-month low as evidence of a weakening economy added to speculation that policy makers will limit further increases in borrowing costs.

Swap rates on contracts maturing in January 2016 fell 10 basis points, or 0.10 percentage point, to 11.20 percent at the close of trade in Sao Paulo, the lowest level on a closing basis since Oct. 31. They closed down two basis points this week. The real climbed 0.3 percent to 2.2243 per U.S. dollar, advancing 1 percent since June 6.

The central bank reported today that its economic activity index, a proxy for gross domestic product, dropped 2.29 percent in April from a year earlier. That was worse than the 1.85 percent contraction forecast by economists surveyed by Bloomberg. Slowing growth spurred the central bank to hold its target lending rate at 11 percent on May 28 after nine consecutive increases to curb inflation.

Speculation that President Dilma Rousseff will face a runoff following October’s vote after overseeing a stalled economy and faster inflation has helped to push the real up 6.2 percent this year, the most among 24 emerging-market currencies.

Morgan Stanley said in a research report to clients that it cut its economic growth forecast for Brazil this year to 1 percent from 1.5 percent.

The World Bank cut this week its estimate for Brazil’s 2014 economic growth to 1.5 percent from 2.4 percent.

Consumer prices increased 6.37 percent in the 12 months through May, the fastest pace in almost a year and approaching the 6.5 percent upper limit of the official target.

To support the currency and limit import price increases, Brazil sold today $198.7 million of foreign-exchange swaps and rolled over contracts worth $494.4 million. The central bank announced June 6 that it was extending its intervention, which was initially scheduled to end this month.

Binary Options - 03 June 2014

http://goo.gl/gJTV6c

Binary Options - 03 June 2014

Quite a wait tonight but worth the wait.

2 done deal: 2 wins, 0 Lose

2 x 76% = 152% Profit (Based on per trade size)

I am out for tonight.

http://goo.gl/gJTV6c

Euro Gains on Bets ECB Action Won’t Weaken Currency More

http://goo.gl/gJTV6c

The euro rose against most of its major counterparts as traders speculated any stimulus measures this week from the European Central Bank won’t be enough to further weaken the 18-nation currency.

The shared currency strengthened from almost its lowest level in three months versus the dollar even as a report showed the jobless rate in the euro area was near a record low in April. Australia’s dollar advanced after the Reserve Bank said growth appeared to be accelerating. Brazil’s real climbed versus its 16 major peers after the central bank increased support for the currency. South Africa’s rand dropped.

The euro gained 0.3 percent to $1.3638 at 9:14 a.m. New York time, after weakening 0.3 percent yesterday. The currency fell to $1.3586 on May 29, the weakest since Feb. 13. The euro advanced 0.3 percent to 139.64 yen. The U.S. currency was little changed at 102.40 yen after gaining 0.6 percent yesterday.

South Africa’s rand was the biggest loser among 16 major peers amid the outlook for sluggish growth in the euro region, the country’s biggest trade partner. The rand depreciated as much as 0.8 percent to 14.6429 per euro, the weakest since May 7, before trading at 14.6336, down 0.7 percent.

http://goo.gl/gJTV6c