Bank Indonesia calls for vigilance over rupiah's falls

JAKARTA (JP): The Indonesian rupiah weakened against the U.S. dollar yesterday, and the monetary authorities were tightening rupiah liquidity to ease speculation on the currency, dealers said.

The rupiah closed on the spot market at 2,610/2,6120 yesterday from the day's opening of 2,575/2,585 and Wednesday's close of 2,585/2,595 following a currency slump in the region.

Jakarta stock prices also tumbled, with the composite index dropping 0.9 percent yesterday to 712.04 as investors sold stock across the board on the back of a weaker rupiah, brokers said.

"The rupiah volatility did trigger selling of stocks which got high exposure to U.S. dollar debts," said ANZ Panin Securities' stocks analyst Tom Soulsby.

Bank Indonesia (the central bank) governor J. Soedradjad Djiwandono called yesterday on banking and business leaders to remain vigilant to assure stability in the rupiah.

He also drummed support from players in the banking and real sectors to help stabilize the rupiah.

"We have to always be cautious, we have to be vigilant, we cannot be careless," Soedradjad told journalists after the opening of an Indonesian National Private Banks Association meeting.

"When the situation really calms down, and there is a new equilibrium, we must make sure that the system we have already built will not be shaken," he added.

Bank Indonesia has intervened by selling dollars this week to calm the markets as the rupiah sharply weakened in foreign exchange trading.

Soedradjad revealed that the central bank injected US$700 million into the market on Monday and Tuesday to neutralize speculative attacks on the rupiah.

Dealers said the central bank pumped in another $400 million on Wednesday to defend the rupiah.

Yesterday, however, the central bank was not seen intervening. But it was draining the rupiah from the market by increasing the overnight rate for short-term Bank Indonesia Certificates (SBI) to 14 percent from 13 percent on the previous day.

"We expect the central bank to again raise overnight rates for SBI to 15 percent or 16 percent tomorrow to discourage speculation on dollar using short-term rupiah," a dealer with a local foreign exchange bank said.

A dealer with a state bank said the central bank asked yesterday for state banks to purchase a certain amount of SBI.

"I heard that tomorrow, the central bank would ask certain private banks to absorb new SBIs," she said.

Dealers said that the central bank did not purchase any short- term money market securities (SPBU) yesterday, which made a number of local banks face liquidity problem.

"It seems to me that the central bank is going all out to drain short-term rupiah from the market. It's a good move to prevent dollar buying with cheap rupiah, but it burdens a number of local private banks with low liquidity," a dealer said.

The central bank kept its intervention band at 2,378/2,682 but raised the conversion band to 2,566/2,614 yesterday from 2,549/2,597 on Wednesday.

Stockbrokers said the weakening rupiah was the main reason for the selling mood on the Jakarta Stock Exchange.

"So far, I think worries in the currency market were the main reason for the selling in the bourse," chief dealer at Asian Development Securities said.

ING Barings Securities' stock analyst Laksono Widodo said most listed companies were affected by the weakening rupiah because some of those companies had dollar liabilities. (aly/rid)

Bankers -- Page 10

Turmoil -- Page 11

Motive -- Page 12