Dollar demand weakens, rupiah to slide<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta Post<\/p>\n
The rupiah may take reprieve from low trading activities next
\nweek, but as the U.S. dollar supply thins, the local unit is
\nstill likely to slide even on mild dollar hunting, said one
\ncurrency analyst.<\/p>\n
Currency analyst Farial Anwar said a drop in dollar purchases
\nfor imports and debt payments have eased pressure on the rupiah.<\/p>\n
Nevertheless, the local unit may shoot up or fall steep in
\nvolatile trading stemming from scant dollar supplies, he said.<\/p>\n
\"Supply is thin, and the rupiah can move in either direction
\nfast,\" Farial told The Jakarta Post over the weekend.<\/p>\n
But he added the rupiah would likely trace last week's quiet
\ntrading on weak corporate demand and the absence of speculators.<\/p>\n
Importers, he said, made the bulk of their purchases in
\nOctober, when they began stocking goods to anticipate a surge in
\nconsumption ahead of the year's end festive season.<\/p>\n
Some dollar debtors followed suit as they tried to hedge the
\ndollar before their maturing dates draw near by year's end.<\/p>\n
Corporate buyers also refrained from upsetting the rupiah's
\nfragile stability, while speculators had mostly left the market.<\/p>\n
\"The rupiah was not roused, with the news of Tommy's capture,\"
\nFarial said, referring to former president Suharto's youngest
\nson, Hutomo \"Tommy\" Mandala Putra, who had been wanted by police
\nfor more than one year.<\/p>\n
Other than Tommy's arrest, there were only a few clues to
\ntrade on, he said.<\/p>\n
He said that Bank Indonesia remained the market's prime dollar
\nsupplier along with the Indonesian Bank Restructuring Agency
\n(IBRA) which converted its dollar proceeds into rupiah.<\/p>\n
Farial said foreign banks' reluctance to trade with smaller,
\nor relative unknown banks further trimmed dollar availability.<\/p>\n
\"Foreign banks ignore weak banks, and impose higher prices for
\ntrading with smaller ones,\" he said.<\/p>\n
Small banks in need of unwinding their positions had problems
\nfinding counter partners in the interbank market, he said.<\/p>\n
\"Foreign banks fear further bank liquidation at the end of the
\nyear, and talks of mergers have also raised their level of
\ncaution,\" he explained.<\/p>\n
According to him, foreign banks began avoiding exposures at
\nsmall banks since the closure of Unibank early last month.<\/p>\n
Bank Indonesia shut down Unibank for incurring a negative
\nCapital Adequacy Ratio (CAR). It should have been at least four
\npercent.<\/p>\n
More banks are at risk of closure, as the central bank will
\nhike its minimum CAR requirement to eight percent this year.<\/p>\n
For this week, Farial expected the rupiah trade at between
\n10,300 to 10,500 against the U.S. dollar.<\/p>\n
But if Bank Indonesia seized the opportunity to intervene in
\nthe market, he said, the rupiah could recover to 10,200.<\/p>\n
Last week, the rupiah tracked a narrow band of between
\n10,400 and 10,450, ending Friday at 10,450.<\/p>",
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