Rupiah hits lowest level in 41 months on dollar demand<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The rupiah fell to a 41-month low on Thursday on high corporate
\ndemand for the U.S. dollar for import needs, exacerbated by a
\nstrengthening greenback against other major currencies and high
\noil prices.<\/p>\n
Aggressive central bank intervention in the forex market
\nhowever, managed to keep the rupiah at bay -- at least for the
\nmoment -- from breaking the psychologically sensitive Rp 10,000
\nlevel.<\/p>\n
The rupiah slumped to an intraday low of Rp 9,975 on Thursday,
\nbefore finally closing at Rp 9,950, its lowest since March 2002.<\/p>\n
The local forex market was closed on Wednesday for
\nIndependence Day celebrations but saw the rupiah closing slightly
\nhigher at Rp 9,920 on Tuesday's trading.<\/p>\n
With Thursday's close, the rupiah has gone down by 6.7 percent
\nthis year, making it among the worst-performing currencies in the
\nregion.<\/p>\n
Currency analyst Khalil Rowter said the rupiah's weakening was
\ndue to the currency being under heavy pressure from both external
\nand internal factors.<\/p>\n
\"The external factor is primarily due to the Japanese yen's
\nrecent weakening against the U.S. dollar, which brought other
\nAsian currencies down,\" he said.<\/p>\n
\"The domestic factor, meanwhile, is related to the huge dollar
\ndemand from state oil and gas firm PT Pertamina for oil imports.\"<\/p>\n
Pertamina receives its daily dollar needs of some $50 million
\nfor oil imports from a consortium of state banks and was not seen
\nin the $200 million local forex market on Thursday, prompting
\nanalysts to conclude that the dollar-buying drive was spurred by
\nprivate corporations concerned about rising oil prices.<\/p>\n
Khalil said there was a high possibility that the rupiah could
\nbreak through the Rp 10,000 a dollar level in the near future, as
\nthe market had already considered the Rp 9,800 level as its new
\nbase and was now testing the ground at Rp 9,900.<\/p>\n
\"If it's only a Rp 35 band left, I see it very possible,
\nperhaps even by the end of this week,\" he said.<\/p>\n
If the rupiah did break the psychologically sensitive level,
\nthere would also be a strong tendency for the rupiah to snowball
\ntowards the edge of a further plunge, with political consequences
\nlooming large, he said.<\/p>\n
\"There will surely be strong public outcry, (with people)
\nsaying the government and the central bank have failed in
\ndefending the rupiah. It will erode the public's confidence in
\nthe government.\" The government's 2006 state budget draft had
\nalso failed to impress the market -- if not giving it negative
\nsentiment, he said.<\/p>\n
The draft budget assumes the rupiah will average at Rp 9,400
\nto the greenback next year. Observers have deemed unrealistic
\nthat assumption, along the oil price projection of a $40 barrel
\naverage, saying the rupiah would likely average Rp 9,500 to the
\ndollar this year, up from its revised-up Rp 9,300 in this year's
\nbudget.<\/p>\n
Bank Indonesia (BI) deputy governor Aslim Tadjuddin was quoted
\nby Dow Jones as saying that the central bank was ready to
\nintervene the market to defend the rupiah and hoped that the
\ndollar would not rise to Rp 10,000.<\/p>\n
Whether the bank could successfully defend a strong rupiah
\nslide, however, is still under question, with data from BI
\nshowing corporate dollar demand in the country continuing to
\nstrengthen, with $9.2 billion worth bought during the year's
\nsecond quarter, up from Rp 7.7 billion in the first.<\/p>\n
Indonesia's forex reserves have also fallen to $32 billion as
\nof this month from $36 billion earlier in the year. Aslim said,
\nhowever, that such a level remained safe and adequate.<\/p>",
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