Rupiah breaches 4,000 barrier

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)

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