A massive foreign funds outflow has contracted the rupiah non-deliverable forward (NDF) contract rate.

As reported by kontan.co.id, the rupiah NDF contract rate for the next month weakened by 1.4 percent to Rp 10,260 per US dollar, the lowest level since Sept. 3, 2009.

Meanwhile, in the spot market, the rupiah weakened by 0.1 percent to Rp 9,810 per US dollar. The spread between the NDF and the spot markets therefore stands at 4.4 percent, the largest since October 2011.

Foreign investors decided to withdraw their funds due to worries concerning the lack of dollar supply in the local market. Data from the Finance Ministry and the Indonesia stock exchange (IDX) market show foreign investors withdrew US$812 million from the rupiah-denominated bond and stock markets throughout June.

Another sentiment weakening the rupiah is the trade account, which has booked deficits in the last four quarters.

"The fundamentals of the rupiah are very weak. Based on trade deficit data, Indonesia needs at least a $1 billion foreign capital inflow per month to mitigate the weakening of the rupiah," Australia & New Zealand Banking Group Ltd. senior strategist Khoon Goh said in Singapore.

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