Rupiah breaches 8,500 level against dollar in panic selling<\/p>\n
JAKARTA (JP): The rupiah continued falling on Friday, breaking
\nthrough the 8,500 mark against the US dollar as investors
\nremained concerned over the future of the country's economy and
\nthe prospect of a hike in U.S. interest rates.<\/p>\n
The currency, which opened at around Rp 8,400 against the
\ndollar, plunged after the lunch break to Rp 8,775, its lowest
\nlevel since late September last year, amid panic selling.<\/p>\n
The Indonesian currency managed to recover in late trading to
\nclose at Rp 8,380 due to Bank Indonesia's intervention, forex
\ndealers said.<\/p>\n
The central bank's intervention reversed the market trend and
\nforced investors to change their position from buying (for US
\ndollars) to profit-taking, the dealers said.<\/p>\n
In addition to the central bank's intervention, the change in
\nthe direction of the rupiah before the close of trading was also
\nprompted by President Abdurrahman Wahid's statement about a plan
\nto cope with the slide.<\/p>\n
The President blamed the rupiah's free fall on reports of a
\nmassive student rally later in the afternoon to mark the second
\nanniversary of the shooting of four students at Trisakti
\nUniversity, an event which led to the fall of former president
\nSoeharto.<\/p>\n
Abdurrahman, more popularly called Gus Dur, said he would make
\nan "all out" effort to curb the rupiah next week if the currency
\ncontinued weakening.<\/p>\n
"Wait until the next three days. If the rupiah continues
\nfalling, then we will do something to stop its fall," he told
\njournalists following Friday prayers. "The government is not
\nstupid, we will wait until May 15 (Monday). If the rupiah remains
\nweak, then we have a method to overcome it," Gus Dur said.<\/p>\n
Analysts said uncertainty of the direction of the country's
\neconomic policy and an anticipation of a further increase in U.S.
\ninterest rates next week remained the major factors behind the
\nrupiah's fall. "But the fall in the last three days was too
\nmuch," one of them said.<\/p>\n
The analysts said the rupiah, which had been undervalued
\nagainst the American greenback since it passed the Rp 7,500 level
\na few weeks ago, would not have fallen to below Rp 8,000 if Gus
\nDur and his economic team had restrained from making unnecessary
\nstatements.<\/p>\n
"I think from now on government (ministers) should be more
\ndisciplined and stop making unnecessary statements," Pardi Kardi,
\na foreign exchange dealer at a local bank, said.<\/p>\n
The rupiah's fall started on Thursday after Coordinating
\nMinister for Economy and Trade Kwik Kian Gie made a negative
\nstatement about the investment climate in Indonesia.<\/p>\n
But forex dealers said Friday's fall in the rupiah was more
\ndue to market sentiments rather than economic fundamentals.<\/p>\n
"The rupiah's free fall today is more due to the market's
\nreaction to the friction within the Cabinet rather than due to
\nthe economy," other analyst said. "News about uncertainty in
\ninvestment and security are nothing new for us and have almost
\nbecome a part of our lives ... so I don't think these kind of
\nstories are very sensitive these days," he said.<\/p>\n
The rupiah would not have breached the Rp 8,500 level if Bank
\nIndonesia had been sensitive enough to monitor the market, the
\nanalysts said. "The central bank had the momentum to revise the
\nrupiah's direction before the lunch break when the panic selling
\nof rupiah was slowing down but it did not do it," he said.<\/p>\n
Bank Indonesia Governor Sjahril Sabirin's statement made
\nearlier in the afternoon that the central bank would only
\nintervene if the move would be effective was also
\ncounterproductive because it triggered more buying rather than
\nreversing the rupiah's movement, the analyst said.<\/p>\n
"We will intervene if we think it will be effective," he said
\nabout possible central bank action to halt the fall of the
\nIndonesian currency.<\/p>\n
Sjahril's remark indicated the lack of the central bank's
\nseriousness in dealing with the falling rupiah, the analyst
\nadded. (udi\/prb\/hen)<\/p>",
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