Rupiah besieged<\/p>\n
Yesterday, it was the rupiah which came under strong
\nspeculative assaults, driving it to a historic low of Rp 2,680 to
\nthe U.S dollar in afternoon trading, on the back of analysts'
\ncomments that the central bank might abolish or widen the
\ncurrency's trading band.<\/p>\n
On the previous day, the Singapore dollar dropped to a 37-
\nmonth low of S$1.50. This wholly unexpected development was
\nblamed by dealers on remarks by a monetary authority official
\nthat the Singapore dollar's level was appropriate with prevailing
\nmarket trends. Earlier on Monday, similar attacks hit the
\nMalaysian ringgit, pushing it to a 42-month low in a panic
\nreaction to Malaysian Prime Minister Mahathir Mohamad's statement
\nthat he was happy with the ringgit's level.<\/p>\n
There is actually nothing unusual or strange in those kind of
\nremarks, which have been blamed by dealers and analysts for the
\nfiercer assaults on the currencies. Such comments might have
\nsimply been discarded by the mass media as \"stock statements\".
\nThat should have been the case if the financial market condition
\nwas normal. But the Southeast Asian foreign exchange market has
\nbeen in turmoil since early last month, depressed by the fallout
\nof the de facto devaluation of the Thai baht. The market forces
\nhave largely been decoupled from underlying economic
\nfundamentals.<\/p>\n
These developments once again strengthen the message that in
\nthe current era of a globalized financial market a currency
\ncrisis in one country could set off a regional contagion through
\nirrational expectations irrespective of the condition of economic
\nfundamentals. Such a contagion breeds not on key economic
\nindicators but largely on perceptions or market expectations
\nwhich are in turn strongly influenced by information.<\/p>\n
No wonder, in such an environment impregnated with irrational
\nworries, officials in key positions should be extra careful about
\nwhat they say or what they refuse to state. Seemingly innocent
\nremarks could easily be misinterpreted by nervous traders. A
\nrefusal to answer reporters' questions could fire up the rumor
\nmill because that could be taken as a deliberate act to hide
\nsomething. Even reports on a news conference at the information
\nministry yesterday further worsened jitters about the rupiah as
\nit was being held amid massive attacks on the currency.<\/p>\n
Likewise, the manners in which the mass media treat stories on
\nthe events around the currency turmoil could mitigate or
\nvindicate the irrational expectations of market developments. Set
\nagainst this, we fully understand and support the appeal by
\nMinister of Information Hartono yesterday that the mass media
\nhelp calm down market jitters. True, until the dust of the
\ncurrency turmoil settles down, the most influential factor in the
\ncurrency market are public expectations which in turn are based
\non what they know or learn from mass media or hearsay.<\/p>\n
However, restraint on the part of the mass media, though quite
\nnecessary, is not enough. Market analysts as the opinion leader
\nfor market players should also refrain from making comments that
\ncould strengthen irrational expectations.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-besieged-1447899208",
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