Rupiah breaches 4,000 barrier

Sat, 06 Dec 1997, 00:00 WIB | Source: JP

JAKARTA (JP): The rupiah hit another new record low yesterday,
breaking the 4,000 psychological level in midday trading while
the stock market gained ground, dealers and brokers said.

Currency dealers said the drop in the rupiah was driven by a
combination of regional weaknesses and increasing dollar demand
by indebted local corporations.

The rupiah, which opened at 3930/50, touched a new historic
low of 4,020 against the U.S. dollar in the spot market during a
lunch break despite a market intervention by Bank Indonesia in
the morning.

The currency recovered slightly to close at 3,970/90 following
a rebound in the Malaysian ringgit, dealers said.

"We were not surprised when the rupiah broke the 4,000 barrier
because we had anticipated it," a local private bank chief dealer
said.

Bank Indonesia managing director Paul Soetopo Tjokronegoro
confirmed yesterday the central bank had intervened in the market
to shore up the rupiah.

"It should be noted that our market intervention now is not to
defend the rupiah at a certain level anymore but to avoid sharp
fluctuation," Paul told journalists after attending a meeting
between the finance minister and businesspeople.

Paul acknowledged that the central bank had intervened in the
currency market several times to supply more dollars to the
market.

"If the demand (for dollars) is too much, we prefer not to
intervene because it would be futile. The principle is don't move
against the market," he added.

He said the central bank had to supply more dollars to the
currency market as the supply was currently still very short due
to the reluctance of exporters to release their dollar holdings.

Bank Indonesia has issued a swap facility for exporters to
encourage them to unload their dollars in the market.

When asked about the size of the intervention, Paul said, "it
wasn't that much, not like when we conducted a joint intervention
together with Japan and Singapore."

Earlier last month, Bank Indonesia conducted a concerted
intervention together with the Monetary Authority of Singapore
and the Bank of Japan to support the rupiah.

Despite continuing interventions, Paul said, the country's
foreign exchange reserves remained strong.

Currency dealers said pressure on the rupiah -- and also on
other regional currencies -- would remain strong until the end of
this month because more and more corporations would enter the
currency market to purchase dollars to pay for their due debts.

Yesterday, Finance Minister Mar'ie Muhammad and several
influential businesspeople agreed to conduct joint road shows
overseas to seek possible rollovers from creditors for the
private sector's offshore maturing debts.

The negative sentiment in the currency market did not affect
the Jakarta Stock Exchange (JSX).

The JSX composite index gained 3.1 percent or 12.85 points to
close at 414.77 with a total turnover of 373.32 million shares
worth Rp 389.23 billion (US$97.3 million).

A broker from Harita securities described yesterday's gain as
a short-term technical rebound, supported by the rise of regional
stock markets.

Other brokers attributed the rebound to support given by
state-owned enterprises.

Brokers said they had seen state-owned Danareksa Sekuritas and
Bahana Securities buying large-cap stocks to prop up the index.

President Soeharto was quoted by businessman Aburizal Bakrie
last month as saying he had instructed state-owned companies to
spend 1 percent of their profits to buy shares or mutual funds
from the market. (aly/rid)