IMF talks, BI intervention prevent rupiah fall

IMF talks, BI intervention prevent rupiah fall

JAKARTA (JP): The rupiah dropped to 3,625 against the U.S.
dollar at midday on the downgrading of Indonesia's foreign and
local currency rating, but then recovered in the afternoon,
currency dealers said yesterday.

They said the lowered rating by Standard and Poor's on
Saturday had pushed the rupiah down only temporarily as the
currency had been guarded not only by Bank Indonesia, but also by
the International Monetary Fund (IMF).

The rupiah opened at 3,530/60,lower than Friday's close of
3,355/65, and continued to weaken to 3,625 but recovered in the
afternoon and closed at 3,470/80.

"I think it is this downgrade rating which has forced the
rupiah to weaken against the American greenback, though only
temporarily," a dealer said.

Standard and Poor's lowered Indonesia's long-term foreign
currency rating to triple-'B'-minus from triple-'B' and long-term
local currency rating to single-'A'-minus from single-'A'-plus.

A currency dealer said that the rupiah recovered yesterday
because Bank Indonesia, the central bank, intervened in the
market.

"The central bank made a rate check yesterday by selling some
dollars when the rupiah reached 3,490," a dealer said.

He said the impact of the central bank was small because it
only sold a limited amount of dollars.

Economists and analysts in Jakarta said talks between
Indonesian officials and IMF teams had corrected the rupiah's
fall as the market was waiting for the IMF financial package.

There were some talks yesterday on the content of the
financial package by the IMF, the World Bank and the Asian
Development Bank to restore market confidence in the Indonesian
economy.

The World Bank country director for Indonesia, Dennis de Tray,
said yesterday that it was still too early to say "what the
financing side of the package will look like".

"One needs to keep in mind that the aim is, one, to provide
whatever additional financing the government may need, and, two,
to rebuild confidence," de Tray told Reuters.

Currency dealers said yesterday that the overall sentiment in
the market had improved after the government decided to seek
assistance from the IMF, the World Bank and the Asian Development
Bank to restore market confidence.

Dealers said that the market had gradually recovered since
last week even though there was not an immediate announcement on
the package from the IMF.

The stable rupiah positively affected share prices on the
Jakarta Stock Exchange (JSX), with the main price index rising
marginally by 0.01 percent to 534.82 points yesterday.

Total turnover was 395.3 million shares on the regular market
valued at Rp 501.5 billion (US$143.28 million).

The head of research at Trimegah Securities, David Chang, said
the long-term foreign currency rating downgrade by Standard and
Poor's also had an impact, though temporarily, on stock trading
activities.

"I think most companies in Indonesia have already realized its
condition in the face of the currency crisis. What is more
important now is how the Indonesian government tackles it," he
said.

He praised the government's decision to seek financial help
from international institutions to help solve the problem, which
sent a good signal to the stock market.

Stock prices rose marginally yesterday as the market responded
to the government's IMF move, Chang said.

"The market has not responded negatively to the seeking of
financial help from the IMF," he added.

He predicted that the IMF -- along with the World Bank and the
Asian Development Bank -- would not impose strict conditions on
Indonesia because it had seen Indonesia as having sound
macroeconomic management compared to neighboring Thailand and the
Philippines. (aly)