Govt takes no action as rupiah dips
Govt takes no action as rupiah dips
Urip Hudiono, The Jakarta Post, Jakarta
Rather than taking real actions to send positive signals to the
market and prevent the rupiah from falling, President Susilo
Bambang Yudhoyono instead appealed to the nation "to stick
together for more constructive measures" to overcome the
situation.
No concrete measures were offered by the President to calm the
market at a time when the rupiah showed no signs of ending its
downward slide, closing on Wednesday at Rp 10,271 a dollar, down
1.8 percent from Tuesday's closing of Rp 10,090, its lowest since
February 2002.
Susilo met with Bank Indonesia on Wednesday evening to address
the issue.
The currency has so far depreciated by 9 percent throughout
the year, which is among the worst performing currencies in the
region.
The rupiah kept weakening as local demand for the American
greenback for import needs -- particularly for oil imports --
continued to overwhelm the scarce supply of dollars in the
country from exports and investment.
The situation has only worsened as global oil prices have
recently been on an upward trend, lingering above $60 a barrel.
Although Indonesia exports oil, the country is likely to be a
net oil importer this year. It also exports its oil based on the
Indonesian Crude Price, which is lower than the international oil
price.
The rupiah's constant decline has created a domino effect, as
Indonesia's stock and bond prices also fell, on fears that the
central bank will raise key interest rates to support the
currency.
On the back of the rupiah's latest slump, Indonesia's main
stock index fell 2.9 percent, after the central bank raised a key
interest rate to help boost the rupiah from a three-year low.
The Jakarta Composite Index fell for the ninth straight
trading day, closing 2.9 percent down to 1035.45.
Meanwhile, the price and yield of Indonesian bonds were also
affected by the rupiah's slump.
The price of Indonesian bonds due in June 2013 fell 1.75, or
Rp 17,500 per 1 million, to 100.25. Its yield rose 37 basis
points to 14.18 percent, according to Deutsche Bank
International.
Despite the gloomy situation, the government still showed no
particular concern, convinced that the rupiah's movement is
according to market forces.
"Our foreign exchange reserve is still safe," Coordinating
Minister for the Economy Aburizal Bakrie said, while blaming the
rupiah's current state partly on the rising state budget deficit
from the fuel subsidy, forcing it to seriously consider speeding
up plans to increase domestic fuel prices.
The central bank, meanwhile, continued its all-out market
intervention on Wednesday to curb the rupiah's decline.
Bank Indonesia (BI) raised its one-week overnight deposit rate
for banks by 0.25 percent to 7.5 percent to absorb excess
liquidity and to stem the rupiah's fall.
Speaking after the meeting with BI, Susilo said the government
should reduce the deficit for the sake of fiscal sustainability
but without creating a negative impact on people of the low
income bracket.
"We are working to reach the balance," he said.
He also called on speculators not to take advantage of the
situation.
Susilo was upbeat that his administration would be able to
defend the rupiah to the level set in the 2006 state budget draft
of Rp 9,400 a dollar.
"It is really complex, but we are sure that we can stick
together to improve the situation," the President said.