Rupiah hits 10,000 on political concerns<\/p>\n
JAKARTA (JP): The rupiah dived to its lowest level in 29
\nmonths to end Friday's trading at 10,090 against the U.S. dollar,
\non rising concerns over the country's ability to put a halt to
\nthe constant political bickering in Jakarta.<\/p>\n
Trading at 9,930 to the U.S. dollar at the opening, the
\nrupiah quickly lost ground and touched the 10,140 level, before
\nclosing at 10,090.<\/p>\n
The rupiah's steep depreciation also dragged down share
\nprices, with the Jakarta Stock Exchange (JSX) Composite Index
\nclosing 3.3 percent lower at 414.11.<\/p>\n
Analysts and the government blamed politics as being behind
\nthe rupiah's breaching of the psychologically important 10,000
\nbarrier.<\/p>\n
Standard & Poor's move earlier to cut Indonesia's sovereign
\nrating to negative from stable only added to the rupiah's woes,
\nthey said.<\/p>\n
Currency analyst Pardi Kendi said concerns abounded that the
\nconflict among the members of the political elite may now be
\nhaving repercussions at the grass-roots level.<\/p>\n
\"The fear is that if the political disputes cannot be
\nresolved, they will reach the grass-roots level, which would
\nparalyze the country's economy,\" Pardi told The Jakarta Post.<\/p>\n
But Coordinating Minister for the Economy Rizal Ramli played
\ndown the impact of the rupiah's fall, arguing that further
\ndepreciation would not hurt the public as food stocks were
\nadequate.<\/p>\n
\"The situation now is much different from that in 1998 when
\nthe stocks of essential commodities were scarce and domestic
\ndemand had to be met with costly imports,\" Rizal told reporters.<\/p>\n
But he expressed concern that political bickering among the
\nelite might further push down the rupiah, adversely affecting the
\nwhole economy.<\/p>\n
Market jitters are focusing on President Abdurrahman Wahid's
\nfuture, as tension between him and his political opponents grows.<\/p>\n
Wahid's position is becoming critical as his most vital ally,
\nVice President Megawati Soekarnoputri, gains support from his
\nopponents to replace him should he be forced out of office before
\nhis term ends in 2004.<\/p>\n
Pardi said this political uncertainty had stimulated rupiah
\nspeculation on the Singapore non-deliverable forward (NDF)
\nmarket.<\/p>\n
\"The NDF market became active when bad news on political
\ndevelopments at home started to come out,\" he explained.<\/p>\n
Singapore banks created the NDF market last month to
\ncircumvent a recent Bank Indonesia ruling that limits offshore
\nspeculation in the rupiah.<\/p>\n
With the creation of a second market for the rupiah, the
\ncurrency can be quoted at different levels. The NDF market quotes
\nthe rupiah lower against the dollar than the local market.<\/p>\n
Pardi said that some traders had used the different quotes to
\narbitrage between the two markets.<\/p>\n
\"They (traders) buy the cheaper U.S dollars here to trade them
\nfor rupiah at a higher price in Singapore,\" he explained.<\/p>\n
He said that as dollar demand for arbitrage transactions rose,
\nthe rupiah became weaker.<\/p>\n
Companies with a real need for the greenback stepped in and
\nscooped up dollars while they were still cheap, he added.<\/p>\n
\"Companies that had been waiting for the rupiah to strengthen
\nthen panicked and joined in (buying dollars),\" he continued.<\/p>\n
\"The rupiah's weakening is a combination of demand for
\nspeculation and that of underlying corporate demand for
\ntransactions,\" he said.<\/p>\n
Bank Indonesia governor Sjahril Sabirin blamed politics as
\nwell, but gave assurances that the rupiah was not on a free-fall
\ncourse.<\/p>\n
He dismissed worries that the rupiah would attain the same
\nrecord levels as at the time when the economic crisis reached its
\npeak in 1998.<\/p>\n
In that year, the rupiah collapsed to as low as Rp 17,000
\nagainst the dollar as the country's economy spiraled to a near
\ncollapse and the political crisis heated up.<\/p>\n
\"The economic conditions in 1998 compared to now were very
\ndifferent,\" Sjahril argued, adding that at the moment the economy
\nwas much more resilient.<\/p>\n
\"We will continue to intervene as before,\" he added.<\/p>\n
But Sjahril said the central bank would take no special
\nmeasures to prevent the rupiah from falling further.<\/p>\n
\"The rupiah fell on account of non-economic factors;
\nimprovements in these factors will help it to strengthen,\" he
\nsaid.<\/p>\n
The interest rate on Bank Indonesia Certificates, the only
\nother instrument useful for controlling the rupiah, would remain
\nat present levels, Sjahril added.<\/p>\n
Bank Indonesia was said to have spent $30 million to rein in
\nthe rupiah's fall this week, but Dow Jones, quoting traders,
\nreported that the central bank had spent as much as $60 million
\non Friday alone. (bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-hits-10000-on-political-concerns-1447893297",
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"sponsor_url": "https:\/\/okusiassociates.com"
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