Bank Indonesia moves to defend ailing rupiah
Bank Indonesia moves to defend ailing rupiah
The Jakarta Post, Jakarta
The beleaguered rupiah ended slightly higher on Friday following
comments from the central bank that it was ready to defend the
local unit and late dollar selling by exporters.
The local currency closed at Rp 8,615 per U.S. dollar,
compared to Rp 8,620 on Thursday.
Earlier in the day, Bank Indonesia deputy governor Aslim
Tadjudin said the central bank was ready to sell its dollar
reserves to defend the rupiah.
"We'll maintain the rupiah so that it does not fluctuate too
much," he was quoted by Bloomberg as saying. "If necessary, we
will intervene. We will do it and sell dollars."
He explained that the weakening of the local unit was mainly
due to end-of-the-month dollar buying by corporations to service
foreign debts, and also because of election jitters.
Dealers said the central bank intervened later in the day and
sold dollars. The move triggered exporters to conduct late-dollar
selling to obtain rupiah to pay for taxes, salaries and other
expenses, which lifted the rupiah from its intra-day low of Rp
8,650.
The central bank is determined to defend the rupiah, a key
factor to controlling inflation, as a strong currency would keep
prices of imported products stable.
Bank Indonesia has targeted inflation this year at around 5
percent.
A relatively benign inflation during the past year has allowed
the central bank to maintain a low interest rate environment.
The local unit has been under pressure over the past couple of
weeks. It has so far weakened by around 2.4 percent this year,
making the currency the worst performing unit in the 15 countries
of the Asia-Pacific region, according to Bloomberg.
Analysts have said that fears over possible violence and other
forms of disruption in the general election had prompted
investors to switch to dollars and hedge against risk.
The domestic condition, compounded by the recent terrorist
bombing in Madrid, had also sent the stock market down, prompting
investors to make a profit by switching rupiah proceeds into
dollar notes.
Dealers expected the rupiah to trade at between Rp 8,600 and
Rp 8,650 per dollar on Monday.
Meanwhile, Jakarta shares extended losses on Friday, which
stock brokers said was linked to political uncertainty ahead of
the elections.
Dealers said there were worries over a possible delay in the
legislative election in some provinces, which may increase
political tension.
The Jakarta Stock Composite Index fell 1.8 percent, or 12.97
points, at 714.13.
The stock market has so far declined by more than 10 percent
in dollar terms in the past month.
"I think most investors wanted to lock in their profit while
they still could," said a dealer with a foreign securities
company as quoted by Dow Jones.
Decliners led gainers 94 to 25, with 62 stocks unchanged.
Volume reached 2.2 billion shares valued at Rp 841.84 billion
(US$99 million).
Bellwether PT Telkom led the market's fall, declining by 2.9
percent, or Rp 200, to Rp 6,600. Its rival PT Indosat fell 1.3
percent, or Rp 50, to Rp 3,675.
Profit-taking also hit bank stocks, which recently
outperformed the market. Shares of Bank Mandiri, Indonesia's
largest bank by assets, edged down 1.9 percent to Rp 1,325, Bank
Central Asia ended down 2.7 percent at Rp 3,575, and Bank Danamon
decreased 3.5 percent at Rp 2,725.