Rupiah hits new low as pressure continues<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Pressure on the rupiah continued on Thursday, sending the local
\nunit to a new multi-month low early in the day, although late
\nintervention by Bank Indonesia helped mitigate the losses.<\/p>\n
The rupiah closed at Rp 8,590 per U.S. dollar, slightly
\nstronger than the 8,610 on Wednesday. But dealers said that the
\nlocal unit fell to 8,730 in early deals as foreign investors
\ncontinue to unload rupiah-denominated assets.<\/p>\n
Bank Indonesia senior deputy governor Anwar Nasution confirmed
\nthat the central bank had intervened and used its foreign
\nexchange reserves to buy rupiah on the market.<\/p>\n
\"Bank Indonesia always stays in the market to guard the
\nrupiah. But the intervention is not to peg the rupiah, only to
\nreduce the volatility,\" he told reporters.<\/p>\n
He did not reveal the amount of foreign reserves it spent on
\nbuying rupiah, but dealers predicted the amount of dollar
\ninjected into the market could not be too large as evidenced by
\nthe relatively thin trading volume.<\/p>\n
The daily trading volume currently averages around US$200-$300
\nmillion.<\/p>\n
Anwar said that the weakening of the rupiah was due to a
\ncombination of external and internal factors.<\/p>\n
On the external front, investors have started to switch to
\ndollar assets on renewed optimism of a rebound in the U.S.
\neconomy this semester, as forecasted by chairman of the U.S.
\nFederal Reserve Alan Greenspan.<\/p>\n
Indeed, other regional currencies have also lately weakened
\nagainst the dollar.<\/p>\n
Anwar said that the declining interest margin between the
\nrupiah and dollar have further pushed some investors to switch to
\nthe American greenback, while at the same time local corporations
\nare also purchasing the dollar to repay foreign debts.<\/p>\n
He added that plans by the government to impose a tax on local
\nmutual funds may have also triggered investors to cash in their
\ngains.<\/p>\n
The booming mutual fund industry, which invest heavily in
\nlocal bonds, have been mainly driven by money from overseas.<\/p>\n
Meanwhile, traders said that the rising political tension
\nahead of the Annual Session of the People's Consultative Assembly
\n(MPR) next month was another possible reason for investors to
\ncash in their local assets.<\/p>\n
But Anwar said that the current decline in the rupiah was
\nstill considered \"normal,\" and should only be temporary.<\/p>\n
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
\nJakti shared the view, saying: \"A depreciation in a range of 1 to
\n2 percent is still normal in a country applying a free-floating
\nexchange-rate system.\"<\/p>\n
Some analysts have also said that the drop in the pressure on
\nthe rupiah should only be short-lived as the country's
\nmacroeconomic fundamentals remained sound and that the government
\nwas committed to continued sales of state assets.<\/p>\n
Another reason is that there is no strong evidence yet that
\nthe U.S. economy would significantly rebound in the near future.<\/p>\n
Meanwhile, Minister of Finance Boediono said that the
\ngovernment would continue to work hard to maintain the country's
\nmacroeconomic fundamentals by controlling inflation and cutting
\ndown the budget deficit as one strategy to stabilize the rupiah.<\/p>\n
The rupiah has been rapidly rising against the dollar during
\nthe first six months of this year, making it one of the best
\nperforming currencies in the region. This has greatly
\ncontributed to current positive developments in two macroeconomic
\nindicators, low inflation and interest rates.<\/p>\n
But in the past two weeks, the rupiah has started to weaken.<\/p>\n
Meanwhile, the rupiah's slide caused another panic sell-off at
\nthe stock market, with the Jakarta Composite Index closing 1.5
\npercent lower on Thursday.<\/p>\n
The index ended at 505.04 points, from 512.62 points the day
\nbefore. The drop in the value of the rupiah will create a
\nheavier burden on companies saddled with huge foreign debts.<\/p>\n
Decliners led gainers 102 to 26, with 67 stocks unchanged.<\/p>\n
Volume was 1.11 billion shares valued at Rp 667 billion.<\/p>\n
\"There was a bit of panic selling as fears that the rupiah may
\nfall further escalated,\" a trader with a foreign brokerage firm
\nwas quoted by Dow Jones as saying.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-hits-new-low-as-pressure-continues-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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