Concerns over reform drag down rupiah again

JAKARTA (JP): The crippled rupiah fell for the second consecutive day yesterday on market apprehension over the country's commitment to thoroughly implementing the revised reforms, currency dealers said.

The rupiah, which opened at 7,700/7,800, closed 2.6 percent lower than the previous day's close of 7,650 against the American dollar, they said.

"The market has sensed a kind of signal from the government that it might backtrack on the reform program agreed with the International Monetary Fund," a currency dealer with a local private bank said.

Mounting concerns arose Tuesday following a controversial remark by Minister of Industry and Trade Mohamad "Bob" Hasan that Indonesia would not honor its IMF commitment to revoke a crude palm oil export ban by April 22, the dealer said.

"Any controversial comments like that only send a very bad message to foreign investors, prompting them to keep dumping the rupiah."

The chief IMF representative in Jakarta, Kadhim Al-Eyd, said yesterday that he had been assured by Bob Hasan that the ban would be scrapped according to the deadline.

Currency dealers said that students staging demonstration on their campuses across the country, demanding economic and political reform, had also prompted most foreign operators to remain on the sidelines of the market.

"Overseas investors perceive the country's political risk as being still high," another local bank dealer said.

Dealers said uncertainty over the resolution of the country's foreign debts in New York had also put more pressure on the rupiah.

They said market concern about the failure of an expected rise in interest rates to materialize also contributed to the rupiah's slide yesterday.

As the rupiah fell, stock prices on the Jakarta Stock Exchange (JSX) also declined as most investors stayed on the sidelines to watch closely the implementation of the reform program.

Stock analysts said a weakening regional market was also responsible for a downturn on the JSX.

The JSX Composite Index closed 2.65 points lower to 513.44 points on total volume of 431.18 million shares changing hands on the regular market valued at Rp 666.94 billion (US$85.50 million). (aly)