Recent drop in rupiah rate normal: Official

Recent drop in rupiah rate normal: Official

JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
said yesterday that the sharp drop in the rupiah rate against the
U.S. dollar earlier this week was not caused by worsening
fundamentals of the country's economy.

"It is normal for the rupiah to fluctuate. It sometimes rises
and sometimes falls," he told reporters.

Soedradjad said that the demand for rupiah, which increased
sharply in early February, dropped last week, causing its value
to decline against the U.S. dollar by 16 points, or nearly one
percent.

In the last two weeks, most commercial banks have bought a
higher amount of rupiah to raise their reserves by one percentage
point to three percent as required by the central bank's latest
ruling, he said.

In addition, many commercial banks have kept more rupiah to
anticipate the higher withdrawals before the Idul Fitri and
Chinese new year celebrations.

"The banks reduced their rupiah liquidity after the holidays.
This consequently pushed down the value of the rupiah," he said
to explain the drop in the rupiah over the last two weeks.

He said that the 16-point drop in the rupiah's value was not
something to be worried about because the fall was still much
lower than the intervention band of the rupiah's exchange rate
against the dollar.

The rupiah strengthened yesterday on the spot market, rising
by two points to a range of Rp 2,313 and Rp 2,315 as more foreign
companies sold their dollars on a profit taking, money market
dealers said.

When asked to comment on the poor ratings assigned by Moody's
Investor Service to the financial strength of the country's
state-owned banks, Soedradjad said many overseas banks also
received the same grade.

"If the banks still have problem loans, we could not, of
course, expect higher rates," he said.

A senior executive of the state-owned Bank Rakyat Indonesia
said last week that Moody's low state-owned bank ratings were not
fair because the U.S.-based rating agency's assessment did not
cover the government's strong support of the state-owned banks'
operations.

In its Bank Financial Strength Rating (BFSR) issued recently,
Moody's assigned a "D plus" grade to Bank Negara Indonesia, the
largest of the seven state-owned banks. Bank Tabungan Negara
(BTN) and Bank Ekpor Impor Indonesia (BEII) also received "D
plus" ratings, while Bank Rakyat Indonesia (BRI) and Bank Dagang
Negara each received an "E plus". The other two banks, Bank Bumi
Daya (BBD) and Bank Pembangunan Indonesia (Bapindo), received "E"
ratings.

The BFSR was only introduced by Moody's late last year to
assess the actual or intrinsic strength of a financial
institution.

Moody's financial strength ratings, issued to supplement the
service's credit risk ratings, were received negatively in China,
Hong Kong, Japan and the United States.(pwn/hen)