Rate hike fails to stop rupiah's fall
Rate hike fails to stop rupiah's fall
JAKARTA (JP): The rupiah hit a 21-month low of Rp 9,500 to the
dollar on Wednesday due to a combination of external factors and
ongoing concern over domestic political uncertainty.
The fall occurred despite another rise in the central bank's
benchmark interest rate to over 13 percent.
The rupiah plunged to Rp 9,500 per U.S. dollar in the
afternoon, but finally closed at Rp 9,405 in late trading,
compared to Rp 9,315 on Tuesday. The last time the local unit hit
the Rp 9,500 level was in October 1998.
The currency market shrugged off the 45 basis point increase
in the interest rate of Bank Indonesia's one-month promissory
notes (SBI) to 13.11 percent on Wednesday.
The central bank also increased the interest rate on the
three-month SBI notes to 13.04 percent.
An analyst at a state financial institution said the dollar
gained on most regional currencies following an earlier statement
from U.S. Federal Reserve chairman Alan Greenspan that he saw no
signs of a U.S. slowdown in productivity growth.
"This means an improved outlook for the U.S. economy and
raises speculation of a further increase in U.S. rates," he said.
He added that news reports that Thailand's central bank would
not intervene to shore up the baht had contributed to stronger
pressure on most Asian currencies.
The analyst said that on the domestic factor, the currency
market remained jittery about Indonesia's political condition
ahead of August's General Session of the People's Consultative
Assembly (MPR).
But he said that the recent meeting of President Abdurrahman
Wahid with MPR Speaker Amien Rais and House of Representatives
Speaker Akbar Tandjung did help improve confidence on domestic
political developments.
He also pointed to rumors that the President was planning a
meeting with the two senior politicians, including Vice President
Megawati Soekarnoputri, to discuss concrete ways to resolve the
country's woes on Wednesday night.
"But overall, investors are still concerned about the
political condition, particularly following the news that the
President himself would attend the House's interpellation
session," he said.
The interpellation session, scheduled for July 20, was
demanded by legislators to seek explanation from the President
over April's dismissal of Laksamana Sukardi and Jusuf Kalla from
the Cabinet.
Other analysts said that Tuesday's pessimistic comments by
Sri Mulyani Indrawati, secretary of the National Economic Council
(DEN), that the government would likely miss again its deadline
in implementing key reform programs promised to the IMF added to
the negative market sentiment on the rupiah.
Coordinating Minister for the Economy, Finance and Industry
Kwik Kian Gie's reiteration on Wednesday that he was optimistic
that the government could meet the deadline failed to inspire the
rupiah.
Meanwhile, Dow Jones newswires quoted dealers as saying that
the Singapore dollar strengthened in late trading but remained
below S$1.7400 after tracking the Indonesian rupiah.
In late trading, the U.S. currency was at S$1.7413, down from
S$1.7433 late on Tuesday.
After sinking below 40 baht against the dollar on Tuesday, the
Thai baht remained depressed after the Thai central bank
governor's announcement of nonintervention.
The dollar was at 40.085 baht late on Wednesday, up slightly
from 40.045 baht the previous day.
The Philippine peso rebounded slightly, thanks to dollar
profit-taking by offshore players.
The dollar closed at 44.640 peso on Wednesday in the
Philippine Dealing System, down from Tuesday's close at 44.820
peso. (rei)