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)