Rupiah bottoms at 6,700
JAKARTA (JP): The Indonesian rupiah hit a historic low of 6,700 against the U.S. dollar midday yesterday on continuing corporate demand and weakness in regional currency markets.
As the rupiah weakened, stock prices on the Jakarta Stock Exchange (JSX) closed slightly higher in thin trading.
"It's true that local corporate demand remains high, but Singapore operators deliberately pushed the rupiah down further when the Jakarta market was off on lunch break," a dealer with a local private bank said.
"People in Jakarta panicked after they saw the rupiah surpass 6,700 during lunch break. But we could do nothing about it," the dealer said.
Spot rupiah closed at 6,600/6,700 to the dollar against an opening of 6,000/6,100 in the morning session.
The rupiah has lost almost 64 percent of its value against the greenback since early July last year.
Currency dealers said trading volume was still thin.
"With such limited trading volume and a widening trading band, the rupiah is easily knocked down by some operators," a dealer said.
Dealers said the central bank was not seen in the spot market yesterday like it was in previous trading days.
But the bank intervened in the swap market to bring swap rates out of negative territory and prevent arbitrage practices.
"The central bank's intervention in the spot market would not even be effective now when the rupiah continues to free-fall," one dealer said.
Dealers said political concerns ahead of the convening of the People's Consultative Assembly in March to elect a president and vice president accelerated the fall of the rupiah against the dollar.
"Political atmosphere approaching the General Assembly in March poses another important factor in the rupiah's decline," another currency dealer said.
Stock prices
As the rupiah weakened, stock prices on the Jakarta Stock Exchange (JSX) closed slightly higher after declining in the morning trading session.
"Most investors do not want to take risks in this very uncertain market," an institutional broker at Trimegah Securities said.
Head of Research at Socgen Crosby Securities Goei Siauw Hong told The Jakarta Post that the market was further depressed by the political atmosphere approaching the presidential election.
Stock analysts said foreign investors, which accounted for about 60 percent of transactions in the stock market, had not returned to the market as they still feared the current monetary crisis would turn into political upheaval.
Other brokers said that with no foreign investors in the market, local investors did not find any clear direction for trading in the stock market.
"We are led by foreign investors in the market and when there are no foreign investors, local investors don't know what to do," the broker said.
The JSX composite index closed 0.18 points higher to 410.29 with 258.95 million shares changing hands in the regular market valued at Rp 259.46 billion (US$40 million).
Securities analysts said they had not seen any reason for the stock market to rise when the rupiah continued to weaken against the dollar.
"I think the main price index is likely to go down further to as low as 200 points in coming months," an analyst said. (aly)
Currencies -- Page 11