Rupiah beefs up to 9,500 against dollar

JAKARTA (JP): The rupiah broke through the 10,000 key psychological level against the U.S. dollar on Wednesday to hit 9,500 -- the highest level since former President Soeharto resigned in May.

Currency dealers said fresh market talks of a possible imposition of capital controls, hopes of slowing the inflation rate and regional strength helped boost the rupiah standing.

A local bank's chief dealer said, "Among those factors, I think the bullish trend in the regional markets is the dominant factor behind the rupiah's strong gain today."

The rupiah continued to gather steam after breaking the resistance level of 10,600 to the dollar on Tuesday and hitting the 10,000 mark on Wednesday.

"It is just a psychological game. The rupiah could easily gain ground after it has broken several psychological barriers," the chief dealer said.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said in Manila on Wednesday that confidence was returning to the rupiah but warned against an overly sharp appreciation in the currency.

But, he added, "I'm very happy about the direction."

Ginandjar, in Manila to attend a meeting of trade ministers from the Association of Southeast Asian Nations, said the government wants to see a "gradual" appreciation in the currency.

"For instance, we don't want to see the rupiah jump to 8,000," Ginandjar was quoted by Associated Press.

Pentasena Securities' head of research, Mohammad Syahrial, said that even at a rupiah rate of 8,000 to the dollar, 260 of the 282 firms on the Jakarta Stock Exchange (JSX) would still be technically bankrupt.

The rupiah was traded at 8,000 to the dollar in early May but shot to 12,000 just days before the downfall of Soeharto on May 21. Since then, the rupiah continued to weakened to 15,000.

The currency started to stage a recovery in July, when multilateral financial institutions and donor countries pledged to pump in billions of dollars in loans.

As the government, through state banks, convert dollars to rupiah, the local currency has steadily risen.

The currency is also benefiting from the signs of waning social unrest and antigovernment demonstrations.

However, dealers warned that the rupiah's sharp rise would be capped in the coming days when the Indonesian Democratic Party (PDI) led by ousted leader Megawati Soekarnoputri holds its congress.

A dealer with another local private bank said, "If PDI's congress runs peacefully in Bali, the rupiah will probably strengthen to 8,000."

Like the rupiah, stock prices on the shattered local market rose Wednesday, with the benchmark price index rising 8.06 points to 266.17 on a total turnover of 130.87 million shares, valued at Rp 146.29 billion, changing hands.

Gainers led loses by 56 to 27, with 82 remaining unchanged.

Stockbrokers and analysts said that some investors took advantage of a stronger regional market to purchase certain selected stocks which had been undervalued due to persistent selling pressures over the past few weeks.

Mashill Jaya Securities' head of research, Edhi S. Widjojo, said the slight increase in stock prices was not supported by strong fundamentals of most companies but was speculative in nature.

"Some short-term investors will take profits in the coming days on gains they made today (Wednesday)," he said. (aly/rid)