Rupiah and shares rise despite Abdurrahman's defiant response

JAKARTA (JP): The rupiah appreciated against the U.S. dollar and shares ended higher on Wednesday despite the defiant response by embattled President Abdurrahman Wahid at the House of Representatives.

The rupiah ended higher at Rp 10,378 per U.S. dollar compared to Rp 10,400 late on Tuesday.

Dealers said that the country's political situation had already been factored in by the market.

They added that the relative calm in the capital, with no significant pro- or anti-Abdurrahman street demonstrations in evidence, helped maintain sentiment.

Thousands of police had been deployed to guard the capital against the expected massive demonstrations.

Abdurrahman appeared at the House to respond to its recent censure of his alleged involvement in two financial scandals. But Gus Dur, as Abdurrahman is commonly known, rejected the censure saying that there were no grounds for the rebuke.

The defiant response by Gus Dur may lead legislators to start the long-process of impeaching the country's first democratically-elected president, thus creating further political uncertainty.

Laksamana Sukardi, a former minister sacked by Gus Dur last year, said that the defiant response would lead the House to issue a second censure, paving the way for the People's Consultative Assembly (MPR) to impeach the President.

He said that this would further erode sentiment in the financial markets.

Laksamana is a top legislator from the Indonesian Democratic Party of Struggle (PDIP), the largest party in the House.

In a seemingly preemptive move to prevent further weakening of the rupiah, Bank Indonesia increased the benchmark interest rate on its one-month SBI promissory notes to 15.58 percent during the weekly Wednesday auction from 15.24 percent the previous week.

The rupiah dropped to a 30-month low of Rp 11,500 per dollar earlier this month partly due to political problems at home.

Bank Indonesia has admitted that it intervened in the currency market by selling its dollars to defend the rupiah.

Bank Indonesia announced Wednesday that its international reserves fell to US$28.53 billion as of the third week of March from $28.57 billion the previous week largely due to repayments of the government's foreign debt rather than because of the market intervention.

International reserves are calculated using gross foreign exchange reserves and only include liquid assets.

Local shares closed higher with the Jakarta Stock Exchange Composite Index up by 1.6 percent, or 5.877 points, at 375.180 points. Gainers led decliners 67 to 41 with 73 stocks unchanged.

Traders said that local punters purchased oversold shares after the expected street demonstrations failed to materialize.

Other Asian currencies were mixed late Wednesday, as they took comfort from the better-than-expected U.S. consumer data and the Japanese yen's bounce, dealers said.

After recovering briefly earlier, the Singapore dollar resumed its descent to yet another 38-month low of S$1.7975, with no signs of intervention by the Monetary Authority of Singapore.

Late Tuesday, the U.S. dollar was quoted around S$1.7927.

In the Thai currency market, the dollar was at 44.400 baht, marginally lower than 44.405 baht late Tuesday.

On the Philippine Dealing System, the dollar closed at 49.215 pesos, up from 49.165 pesos Tuesday.

Against the New Taiwan dollar, the U.S. currency ended lower for the fourth consecutive session, at NT$32.669 compared with NT$32.679 at Tuesday's close.

In Seoul, the dollar finished at 1,304.5 won, down from Tuesday's close of 1,309.5 won. (rei)