(Bloomberg) — Indonesia’s sank by the most in two months ahead of a parliamentary hearing on the nation’s debt monetization plan, prompting intervention by the central bank.

The currency dropped as much as 1.5%, its biggest decline since May 4. Even after the intervention, it was 1.3% lower at 14,570 per dollar at 2:05 p.m. in Jakarta

“Investors are a bit spooked by debt monetization concerns, increasingly so since the figure is quite big and will be a pain to unwind later,” said Yanxi Tan, a foreign exchange strategist at Malayan Banking Bhd.

Parliament’s financial commission in a hearing on Monday will scrutinize Bank Indonesia’s agreement to fund $40 billion of the government’s fiscal response to fight the coronavirus.

Febrio Kacaribu, head of the finance ministry’s fiscal office, said Friday that both sides were being careful to make a plan that would be “very prudent” and maintain monetary independence, fiscal integrity and stability.

Still, some investors are concerned that it has sparked the risk of a downgrade of Indonesia’s sovereign rating.

Indonesia Risks Losses by Deeper Dive Into Debt Monetization

“Markets are concerned that there will be a marked increase in liquidity as Bank Indonesia increases holdings of government bonds to support fiscal authorities,” said Chang Wei Liang, a macro strategist at DBS Bank Ltd. in Singapore.

The nation’s 10-year government bond yield was steady at 7.23% on Friday.

Meanwhile, a spike of coronavirus cases was also weighing on the currency after the country reported 1,624 infections on Thursday, the biggest single-day jump so far.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link