Political factors pull the rupiah down to Rp 9,435
Political factors pull the rupiah down to Rp 9,435
JAKARTA (JP): Strong pressure on the rupiah persisted on
Thursday amid continuing disquiet over domestic political
uncertainty.
The local currency ended lower at Rp 9,435 per U.S. dollar in
late trading on Thursday, compared to Rp 9,405 per dollar the
previous day.
At one point during the day the rupiah plunged to a 21-month
low of Rp 9,580 per dollar, but traders said that dollar selling
by state banks had prompted investors to take profits in the
afternoon.
Analysts said that the currency market was still edgy about
the country's political developments.
They pointed out that the cancellation of a planned meeting on
Wednesday evening between the country's top four political
leaders of President Abdurrahman Wahid, Vice President Megawati
Soekarnoputri, Speaker of the People's Consultative Assembly
(MPR) Amien Rais and Speaker of the House of Representatives
Akbar Tandjung had raised concerns that the political scene would
remain tense in the run up to the crucial MPR general session in
August.
Communal clashes and social unrest in general have been
plaguing the country.
There has been speculation that the rupiah could gradually
weaken and break the Rp 10,000 level ahead of the MPR congress,
at which the President will deliver an account of his one-year
old administration.
Traders also said comments by Bank Indonesia senior deputy
governor Anwar Nasution earlier in the day that the central bank
had no plans to force exporters to bring their dollar earnings
home or to impose some kind of restriction on foreign exchange
transactions had encouraged currency players to hold onto their
dollars.
Earlier there was talk that Anwar would announce such measures
at a meeting with executives of foreign banks here on Thursday.
But Anwar said that it was purely a "regular meeting" aimed at
ensuring bankers commit to prudential banking regulations, and
that there was no threats made against foreign bankers.
He dismissed a report in a local newspaper that Bank Indonesia
had threatened foreign banks here for engaging in currency
speculation.
Anwar, however, said in the afternoon after meeting with
senior economic ministers that the central bank was studying the
possibility of introducing measures to limit the space for
currency speculators to carry out their activities.
He declined to provide details.
"Let's just wait. We're still studying it," he said.
He also declined to comment on whether the current weakening
of the rupiah was due to large-scale speculation.
"That's why we are making the study," he said.
But Anwar appealed to the public not to rush to blame foreign
banks, including those in Singapore, and hold them responsible
for the plunge of the rupiah.
He said that the current weakening of the rupiah was largely
due to domestic political uncertainty, the remaining problems
with the country's banking system and the slow progress of
corporate debt restructuring.
Anwar said that foreign banks had actually helped the
country's real sector by channeling working capital as domestic
banks had been unable to perform their intermediary role.
"Foreign banks have made a positive contribution to our
economy. Without them it would be impossible for our real sector
to move," he said.
Against other Asian currencies, the dollar slipped to S$1.7424
from S$1.7427 the previous day, and 44.67 Philippines pesos from
44.68
The greenback also fell to 40.025 Thai baht from 40.115. (rei)