BI to move into defense against rupiah weakening

JAKARTA (JP): Bank Indonesia said on Friday it would attempt to defend the rupiah against rising selling pressure amid fears of growing anti-foreign sentiment here.

Bank Indonesia Governor Sjahril Sabirin said a surge in anti U.S. demonstrations had added to the negative sentiments against the rupiah.

"We will attempt to keep the rupiah unaffected by these conditions," Sjahril told reporters but did not say whether that would include market interventions.

The rupiah has been reeling from a rise in anti U.S. protests, triggered by the United States' plans to attack Afghanistan.

Radical Islamic groups threatening to sweep for American citizens and expel them, prompted the U.S. government to issue a travel ban on Indonesia.

According to U.S. Ambassador to Indonesia, Robert Gelbard, eight U.S. firms have already left the country over security concerns.

Fear of street violence, as thousands of anti America protesters flooded Jakarta's thoroughfares on Friday, also contributed to negative market sentiments, dealers said.

The rupiah ended Friday trading down at Rp 9,710 against the U.S dollar, from 9,685 in Thursday trading.

Since the terrorists attacks on New York and Washington on Sept. 11, the rupiah lost seven percent of its value.

Sjahril said much of the rupiah's woes were inflicted by developments on the global front.

The attacks left the global economy teetering into recession, pushed by a sharp drop in the U.S. consumer confidence as the country prepares for war.

However, he said the central bank would not act solely in response to the impact of the terrorists attacks.

"In the efforts we do, we will see this (development) as a whole picture," he said.

Sjahril expected the rupiah downturn only shortlived.

"The rupiah has seen lots of negative impacts, if there are new ones we hope they won't affect the rupiah too much," he said.

But according to him, it has become difficult to predict the rupiah's movement.

He said the rupiah could still find reprieve from the lasting confidence the market has in the new government.

"We hope that all of this (recent developments) will have no negative impact, in net I mean," he said.

The new government managed to regain the confidence of the international finance community, when it secured a lending agreement with the International Monetary Fund (IMF) in August.

Indonesia received major donor countries' commitments for the rescheduling of sovereign debts, as well as for continued financial aids.

But analysts attributed the rupiah recent falls, to the market's short term reaction from talks of war and global recession.

On the stock market, the index mirrored the rupiah's drop.

The Jakarta Stock Exchange (JSX) Composite Index shed 0.7 percent of its value on Friday trading, dropping to 392.47 compared to 395.04 a day before.

Separately, senior economists Dradjad Wibowo at INDEF warned the government against turning a deaf ear to the anti U.S. protests on the streets.

"If people here perceive the government as being pro America, there will be more demonstrations," he warned.

He said Indonesia should strike a fine line of supporting a global fight against terrorism, without blindly following the U.S. lead.

"This isn't easy..... it's risk management, the government must know that if the U.S attacks Afghanistan, Muslims here will react," he said.(bkm)