BI to continue intervention to help rupiah, Sjahril says<\/p>\n
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on
\nFriday that, if necessary, the central bank would continue to
\nintervene in the financial market to help the beleaguered rupiah.<\/p>\n
The comment helped push the rupiah slightly up from the day's
\nlow of Rp 9,890 per U.S. dollar, ending at Rp 9,860 in late
\ntrade, unchanged from the level on Thursday.<\/p>\n
\"We'll continue to intervene if necessary,\" Sjahril told
\nreporters at Bank Indonesia headquarters.<\/p>\n
Analysts said that with gross foreign exchange reserves
\nstanding at more than US$29 billion, Bank Indonesia had
\nsufficient ammunition to undertake any necessary intervention.<\/p>\n
The rupiah has plunged to its lowest level in more than two
\nyears, briefly skirting around Rp 9,900 per dollar earlier this
\nweek.<\/p>\n
Sjahril also said that the new foreign exchange ruling
\nintroduced by Bank Indonesia in the middle of January helped the
\ncurrency remain below the Rp 10,000 to the dollar level.<\/p>\n
\"The new forex ruling has been effective,\" he said.<\/p>\n
The forex ruling basically bans the transfer of rupiah to non-
\nresidents to help curb speculation against the local unit
\noverseas. The measure is aimed at reducing the volatility of the
\nrupiah's exchange rate.<\/p>\n
But Sjahril reiterated that Bank Indonesia had no intention of
\nintroducing capital control.<\/p>\n
The new forex ruling has raised fears that it was a
\npreliminary step toward Malaysian-style capital control.<\/p>\n
Traders said that the sharp plunge in the rupiah this week was
\ncaused by several factors.<\/p>\n
Worsening relations between the government and the
\nInternational Monetary Fund (IMF) had raised fears that the Fund
\nwould continue to delay the disbursement of its next US$400
\nmillion loan tranche to the country, which could prompt other key
\nmultilateral and bilateral lenders to also halt their assistance
\nto Indonesia.<\/p>\n
Such a scenario would have a devastating impact to the
\ncountry's state budget and economy.<\/p>\n
The IMF delayed disbursement of the funds due to concerns over
\nthe government-proposed bill on the amendment of the central bank
\nlaw, the new fiscal decentralization policy and delays in the
\nsale of government ownership in the publicly-listed Bank Central
\nAsia (BCA) and Bank Niaga.<\/p>\n
But Coordinating Minister for the Economy Rizal Ramli claimed
\nearlier this week that he had managed to reach agreement with the
\nIMF over the delicate issue of amendments to the central bank
\nlaw.<\/p>\n
The House also approved on Thursday the government plan to
\nsell BCA and Bank Niaga.<\/p>\n
Minister of Finance Prijadi Praptosuhardjo said that this was
\na positive development which would improve relations with the
\nIMF.<\/p>\n
The recent ethnic violence in Sampit, Central Kalimantan,
\nwhich has killed hundreds of people, also created jitters on the
\nfinancial market with fears that the bloody unrest could spread
\nto other parts of the country.<\/p>\n
Fears that the rupiah might drop below the Rp 10,000 level
\nprompted corporations to purchase dollars in a bid to secure
\nresources before repaying maturing overseas debt.<\/p>\n
Analysts, however, said that the prospect of the rupiah
\nplunging beyond the Rp 10,000 level was very slight.<\/p>\n
They said it would be unlikely that indebted companies will
\ncontinue purchasing dollars at a very high rate.<\/p>\n
They also said plans by the Indonesian Bank Restructuring
\nAgency (IBRA) to sell its dollars would prevent the prospect of
\nthe rupiah continuing to fall beyond the Rp 10,000 level.<\/p>\n
Experts pointed out that IBRA would have to sell its dollars
\nif the rupiah fell below Rp 10,000 to make huge profits.<\/p>\n
IBRA has more than $500 million to sell on the markets this
\nyear. The agency obtains the currency from the sale of its
\nvarious banking assets.<\/p>\n
Meanwhile, Dow Jones said that with President Abdurrahman
\nWahid still under attack from the House of Representatives, the
\nrupiah would likely test the Rp 9,910 resistance level next week.<\/p>\n
The domestic spot market will be closed on Monday for a
\nnational public holiday, reopening again on Tuesday. (rei)<\/p>",
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