Rupiah strengthens after BI inspects some banks<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The rupiah rebounded slightly on Friday amid market talks that
\nBank Indonesia had sent inspectors to foreign banks that were
\naggressively selling the local unit.<\/p>\n
Bank Indonesia confirmed that it had dispatched officials to
\nsome banks earlier in the day.<\/p>\n
\"We want to determine whether their dollar buying was backed
\nby genuine underlying transactions or whether it was for
\nspeculative purposes,\" a central bank official was quoted by Dow
\nJones as saying.<\/p>\n
The rupiah closed slightly higher at Rp 8,520 per U.S. dollar
\nfrom 8,590 on Thursday.<\/p>\n
After rising rapidly against the U.S. dollar during the first
\nsix months of this year, the local unit started to weaken two
\nweeks ago, and worsened over the past few days, prompting the
\ncentral bank to intervene by selling dollars to reduce
\nvolatility. At one point, the rupiah fell to a three-month low of
\n8,730.<\/p>\n
Top Bank Indonesia officials tried to calm the market by
\nsaying that the drop in the value of the rupiah would be
\ntemporary as the country's economic fundamentals remained sound,
\ncoupled with relatively stronger foreign exchange reserves of
\nabout US$35 billion, which should be enough to finance more than
\neight months of imports and defend the unit against the sudden
\noutflow of \"hot money\".<\/p>\n
Bank Indonesia senior deputy governor Anwar Nasution voiced
\nconfidence that the rupiah could rebound to the 8,200 level.<\/p>\n
He explained that fluctuation in the rupiah's exchange rate
\nwas a normal consequence of the floating exchange rate system,
\nadopted by the country in 1997.<\/p>\n
He also said there was no reason for people to be wary about
\nthe Annual Session of the People's Consultative Assembly (MPR) in
\nAugust.<\/p>\n
Some dealers previously said that rising political tension
\nahead of the MPR session, as well as other factors like dollar
\npurchases by companies to repay foreign debts and a switch to
\ndollar assets by those betting on a rebound in the U.S. economy
\nthis year, would have a negative impact on the rupiah.<\/p>\n
Citibank economist Anton Gunawan said that investors had been
\nwaiting to cash in their gains from the earlier surge in the
\nrupiah, which became possible after positive remarks made by
\nFederal Reserve chairman Alan Greenspan last week about the U.S.
\neconomy prompted the dollar to strengthen. The drop in the rupiah
\nwas accelerated by panic among domestic investors.<\/p>\n
But Anton also opined that the drop in the rupiah would be
\nshort-lived, applauding the inspection measures taken by Bank
\nIndonesia at some banks, particularly those that had been
\naggressive sellers of the rupiah.<\/p>\n
\"This (measure) should effectively guard the rupiah and deter
\nspeculation (against the rupiah),\" he told The Jakarta Post.<\/p>\n
\"Over the next month, the rupiah could recover to around
\n8,400,\" he said, pointing out that the upcoming privatization of
\nstate-owned enterprises would create capital inflow and help
\nstrengthen the local unit.<\/p>\n
Meanwhile, shares on the Jakarta Stock Exchange (JSX), which
\nhad weakened during the previous four days, ended 1 percent
\nhigher at 510.08 on Friday on the back of the strengthening
\nrupiah.<\/p>\n
The weakening of the rupiah is feared to impose heavier burden
\non companies saddled with huge foreign debts.<\/p>\n
Gainers led decliners 82 to 29, with 83 stocks unchanged.<\/p>\n
Bank Central Asia led gainers, rising 4.6 percent to Rp 2,825,
\non a rebound after falling 5.3 percent in the past four sessions.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-strengthens-after-bi-inspects-some-banks-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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