Political concerns force rupiah down against dollar
JAKARTA (JP): The rupiah weakened to pass the critical 8,000 mark against the U.S. dollar on Monday on concerns of possible large-scale violence ahead of and during the Special Session of the People's Consultative Assembly (MPR) next week, dealers said.
Stockbrokers said stock prices on the Jakarta Stock Exchange surprisingly booked a 2 percent gain but warned that the tense week leading up to the MPR session would depress the market.
They said the improvement in the stock market was partly technical in nature, driven by arbitrage trading on dollar- denominated stocks following the sudden drop of the rupiah.
Currency dealers said the rupiah appeared steady in the morning, trading at the 7,600 level, but after 4 p.m. Jakarta time sporadic purchasing of dollars by local players suddenly knocked the currency down below 8,000.
A currency dealer with a local private bank said: "The volume of this late buying was actually very small. However, as there was no counter from state banks as in previous days, the rupiah could not be saved."
"As the rupiah was already below the 8,000 level, it could easily fall further, especially in this tense political situation, unless state banks step up dollar sales again."
The rupiah closed Jakarta trading at 8,025/100 to the dollar, down from Friday's close of 7,600.
In the last two weeks, the Indonesian rupiah had been steady at between 7,000 and 8,000, on the back of confidence in an economic recovery. Political violence could undermine that confidence.
If not protected by state banks, dealers said, the rupiah could easily nose-dive to 10,000 ahead of the MPR Special Session.
The Special Session of the 1,000 member Assembly, from Nov. 10 through Nov. 13, will pave the way for elections in the middle of next year.
Still, analysts warned that discontent with President B.J. Habibie's government and its failure to lift the country out of its first recession in 30 years, could trigger protests similar to those that ended former president Soeharto's rule in May.
If the session went off peacefully and its outcome was accepted by most of the people, analysts said, the local financial market would pick up again and the economy would return to growth.
Bahana Securities' associate director and head of institutional sales Andre Cita said: "As long as you don't get any major political or social disruption, I think that little by little our economic situation will become clearer so that at some point we can say probably we're already near the bottom."
Cita said Indonesian stocks rose 2 percent on Monday in line with other markets in the region, amid expectations of a weak dollar and the likelihood of lower interest rates boosting the economy.
The Jakarta Stock Exchange Composite Index closed 6.428 points higher at 307.198 with a total of 159 million shares worth Rp 184.4 billion changing hands.
Stockbrokers and analysts said trade and inflation data released on Monday was not a surprise to the market as they had been anticipated. Nevertheless, good news always motivated short- term players in the market to trade stocks, expecting even the slightest gains.
Stockbrokers said some players bought some dual-listed stocks like market leader domestic telecommunications firm PT Telkom, international call operator PT Indosat and tin miner PT Tambang Timah -- all state-controlled firms -- to benefit from the fall of the rupiah against the dollar.
Telkom gained Rp 150 to close at Rp 2,025 on 11.87 million shares traded, Indosat climbed Rp 575 to Rp 8,775 on 678,500 shares and Tambang Timah rose Rp 275 to Rp 4,450 on one million shares.
Cigarette maker PT Gudang Garam inched up Rp 25 to Rp 6,875 on 819,500 shares traded, and competitor PT HM Sampoerna was up Rp 125 to Rp 3,125 on 3.35 million shares. (rid)