Rupiah breaks 13,000 barrier against dollar

Rupiah breaks 13,000 barrier against dollar

JAKARTA (JP): The rupiah broke the 13,000 barrier against the
U.S. dollar in thin morning trade yesterday but managed to
recover slightly in the afternoon to end the day at 12,900.

Currency dealers attributed the rupiah's slump to political
uncertainty at home and weak regional markets.

The sharp drop in the currency dragged down local stock prices
as investors became concerned that the rupiah's fall would
further dampen operations of publicly listed companies.

The market sentiment, hit by political uncertainty over the
last several weeks, was affected by fears over the Japanese yen's
drop against the U.S. dollar and a possible devaluation of the
Chinese yuan.

"This negative sentiment hit both the rupiah and the stock
market," one analyst said.

Currency dealers said that the rupiah, which opened yesterday
at 11,800 against the greenback, might further sink to 15,000 in
the days ahead should regional markets continue their downward
trend on top of political uncertainty at home.

The rupiah plunged to 14,500 against the dollar on Jan. 27
after reaching a record low of 16,800 on Jan. 9.

"Should there be any major social and political unrest in the
days ahead, the rupiah could touch uncharted territory," one
dealer said.

The country's social and political uncertainties have remained
unresolved, with more protests seen in several major cities here
demanding companies to raise wages and an end to rampant nepotism
and corruption.

Following a public protest against Maspion Group in Surabaya,
East Java, the previous day, more than 1,000 employees of the
state-owned airline PT Garuda Indonesia, including pilots in
their airline uniforms, staged a protest demanding a total
management overhaul and the eradication of corruption, nepotism
and collusion from the airline.

An economist with Danareksa Sekuritas, Raden Pardede, said
yesterday that similar protests would further hamper the
country's efforts to improve its economic situation.

"If similar social unrest takes place, the country's political
situation will worsen," he said, adding that efforts to bring the
country out of its dire crisis would not bear any fruit.

He said the country's economy and financial markets would
likely weaken in the medium and long terms if there were no
clear-cut measures introduced by the government to address
political problems.

"Political stability is the key factor in healing the
country's economy and financial markets. The longer the political
uncertainties remain unresolved, the longer it will take to
improve our economy," another analyst said.

Following the fall of the rupiah, stock prices on the Jakarta
Stock Exchange (JSX) closed 0.7 percent lower or 2.92 points to
408.08 yesterday on a total turnover of 250.72 million shares on
the regular market valued at Rp 235.59 billion (US$20.48
million).

Stockbrokers said that trading in the local bourse remained
lethargic for the whole trading day with most investors seen
placing large selling orders on most stocks.

"I think investors are fully aware that the country's economy
will continue to deteriorate," a dealer with Bali Securities said
yesterday.

He attributed the mild decline in the main price to arbitrage
buying on cross-listed stocks like PT Telkom and Indosat to
benefit from the weakening rupiah.

The stock prices of the state telecommunications firm PT
Telkom and satellite operator Indosat account for about 30
percent of market capitalization in the local exchange. (aly)