Rupiah rebounds on BI support<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The latest concerted measures taken by the government and the
\ncentral bank to help the rupiah have proven to be successful, as
\nthe local currency managed to break free of its seven-day slump
\nagainst the U.S. dollar and began rebounding to a stronger level.<\/p>\n
The rupiah nudged slightly higher on Wednesday to Rp 9,785 a
\ndollar, from Tuesday's closing of Rp 9,870, its lowest rate in
\nthe past two years.<\/p>\n
In an effort to bring the country's daily forex market back
\ninto balance, the government and Bank Indonesia (BI) announced on
\nTuesday that it would provide state oil and gas firm PT
\nPertamina's huge, market-distorting oil import dollar needs
\ndirectly from the country's forex reserve.<\/p>\n
The government and BI will also arrange the dollar supplies
\nfor other state-owned enterprises (SOEs) through appointed state
\nbanks, and require them to place their forex export proceeds in
\nlocal banks.<\/p>\n
The central bank's new inflation targeting reference rate, set
\nat an initial 8.5 percent, also proved to become another positive
\nfactor for the rupiah. Higher interest rates should help the
\nlocal currency by making it more attractive to invest in, and mop
\nup excess market liquidity.<\/p>\n
In an open auction of its SBI promissory notes on Wednesday,
\nthe central bank managed to sell Rp 15.1 trillion (US$1.54
\nbillion) of its one-month notes at a weighted average yield of
\n8.44 percent -- up from its previous 8.25 percent -- with bidders
\nrequesting yields ranging from 8.19 percent to 8.63 percent.<\/p>\n
BI's three-month interest rate also rose to 8.45 percent --
\nfrom 8.05 percent -- with bids requesting yields between 8.38
\npercent and 8.63 percent. The auction managed to absorb Rp 160
\nbillion of market liquidity.<\/p>\n
The rupiah's strengthening, however, failed to provide enough
\npositive sentiment for the Indonesian market, as share prices
\nslipped from falling telecommunication bluechips.<\/p>\n
Stocks ended lower on Wednesday, with the Jakarta Composite
\nIndex shedding 13.356 points or 1.2 percent to 1117.812, on the
\nback of market concern that state telco firm PT Telkom might get
\nits U.S.-listed shares suspended if it fails to file its 2004
\nearnings on time.<\/p>\n
Meanwhile, contrary to the positive sentiment it brought for
\nthe rupiah, the central bank's new BI rate proved disadvantageous
\nto the stock market, as bank shares fell on concerns that the
\nrising interest rates might hurt profits.<\/p>\n
Shares of the country's three largest state banks -- Bank
\nMandiri, Bank Negara Indonesia and Bank Rakyat Indonesia -- all
\nfell by 0.7 percent, 1.8 percent and 0.9 percent, respectively.<\/p>\n
BI's rising benchmark rate -- meant to help manage inflation
\nat its 7.5 percent target for this year -- could hurt businesses,
\nas it would influence banks to raise their interest rates as
\nwell, making loans to corporations more expensive.<\/p>\n
The rupiah is expected to further strengthen on more positive
\nsentiments, as BI will also implement its newest anti-speculative
\nregulation next week, requiring banks to limit their overseas
\ndollar loans to a maximum of $1 million without underlying
\nassets.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-rebounds-on-bi-support-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
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