BI rejects devaluation rumors
JAKARTA (JP): Bank Indonesia's Governor J. Soedradjad Djiwandono rejected yesterday rumors of a devaluation and a free- float of the rupiah against the U.S. dollar.
"The banking and financial sector has always been prone to rumors and I cannot confirm things like that," he said at a press conference.
AFP reported from Singapore yesterday that the rupiah still came under pressure in trading in the island republic after sinking to a historic low against the U.S. dollar overnight on rumors Wednesday that the currency was to be free-floated.
"Trading was wild overnight in Europe and New York where the rupiah shrank to a historic low of 2,307 against the U.S. dollar," said a dealer with an American bank in Singapore.
Dealers said that the plunge was triggered by speculation that the Indonesian central bank was to abolish the trading band for the rupiah after days of rumors that the currency would be devalued.
The currency recovered slightly in Singapore trading yesterday, with the U.S. dollar being quoted at Rp 2,285, but down from Rp 2,274 the previous day.
"The rupiah level in Singapore nearly kissed the upper band of the fixing," Andy Tan, a Singapore-based regional economist for U.S. investment house MMS International, was quoted by the news agency as saying.
Bank Indonesia widened the exchange rate band of the rupiah last June from Rp 30 to Rp 44 to provide more room for the monetary policy to work and to allow for more price adjustments.
Foreign exchange markets have been gripped by rumors on the rupiah since last week as the U.S. dollar continued to surge against most Asian currencies.
The U.S dollar began rising against most Asian currencies after the central banks of the United States, Japan and Germany gave a powerful signal last week that they were on a course to move the greenback significantly higher.
The Korean won was among the biggest losers to the U.S. dollar, dropping by 0.8 percent over the last five days, according to rates provided by MMS International. The dollar was quoted at 776 won on Wednesday against 770 won last Thursday.
Soedradjad, during yesterday's press conference, also announced the issuance of new banknotes in denominations of Rp 20,000 and Rp 50,000 starting Monday.
"The new notes have better built-in features of security to prevent counterfeits," he said.
The old Rp 50,000 banknotes bearing Soeharto's portrait were issued in 1993 and the Rp 20,000 bills in 1992.
Soedradjad said the new banknotes, which will gradually replace the old news, bear the same nonfigurative features as the old ones, differing only in the inscriptions written on the safety thread and the signatures of the central bank's governor and director.
The new bank notes bear the signature of Soedradjad, who replaced Adrianus Mooy in March, 1994, and Bank Indonesia Director Boediono, who replaced T.M. Sjakur Machmud.
Soedradjad said the issuance of the new banknotes would not influence the amount of money in circulation and would not accelerate the inflation rate.
"The circulation of the new bank notes will be based on the monetary policy," he said.
Soedradjad also announced that the old banknotes of Rp 10,000 or less, issued before 1989, would also be withdrawn starting next month.
Presently, old banknotes of Rp 100 denomination (issued in 1984) account for 8.5 percent of the total amount in circulation, Rp 500 notes (in 1988) for 7.2 percent, Rp 1,000 (in 1987) for 6.7 percent, Rp 5,000 (in 1986) for 3.5 percent and Rp 10,000 (in 1985) for 4.1 percent. (pwn)