Rupiah breaks 3,700 barrier against dollar

JAKARTA (JP): The rupiah broke yesterday the 3,700 barrier as the rush for U.S. dollars continued on the local foreign currency market.

Foreign exchange dealers said the rupiah plunged to a new historic low of 3,725 against the American dollar in midday trading but it managed to recover in the afternoon to close at 3,640/50, a 7 percent drop from its 3,395/3.405 opening.

The dealers attributed the worsening of the rupiah's value to a continued increase in the demand for U.S. dollars.

"I think the market is getting more nervous as more and more companies join the dollar purchases," Bank Bali's chief dealer Suriyanto said.

The rupiah's value has declined by more than 50 percent against the U.S. dollar following speculative attacks on the rupiah since early July.

Bank Indonesia Governor J. Soedradjad Djiwandono partly blamed yesterday the continued drop in the rupiah on the rush for dollar made by local companies, in addition to the domino effect of the fall in other regional currencies.

"It is not only rupiah that has depreciated against the American dollar... but all other currencies in the region," he told journalists when announcing the central bank's new forex trading facility.

He said the new facility, which includes swap incentives to export-oriented companies, was introduced to help end the rush on dollar.

But the central bank governor could not predict when the currency turmoil would end, saying the rupiah was unpredictable.

"Be it government officials or economists... please don't be so haughty," he said when asked if the rupiah rate was reaching its new equilibrium level.

Soedradjad said yesterday the central bank would intervene in the market if conditions allowed.

Currency dealers said the volume of the forex transaction in the foreign exchange market was relatively meager yesterday hovering between US$200 million and US$300 million.

"In terms of volume, it is relatively small... similar to the volume in previous days," Suriyanto said.

The weakening rupiah also had a negative impact on stock trading.

The Jakarta Stock Exchange's Composite Index lost about 4 percent to close at 515.47 percent in thin trading, with 437.17 million shares changing hands at Rp 481.11 billion ($141.50 million).

Securities analysts and brokers attributed the plunge of share prices to the weakening rupiah in the currency market.

"I think that most people were in panic selling mode yesterday as the rupiah continued to weaken," an analyst with Penthasena Securities said.

Brokers also attributed the fall of stock prices to growing market talk of a banking default in the country.

"There is growing market talk about a banking breach in Indonesia... and this sent negative sentiment to the market," a broker with a joint brokerage house said.

Most blue chip stocks ended lower yesterday with satellite operator Indosat falling by Rp 200 to Rp 8,500, Telkom by Rp 75 to Rp 3,450, cigarette maker Gudang Garam by Rp 275 to Rp 9,275, Sampoerna by Rp 625 to Rp 5,700, Bank Internasional Indonesia by Rp 100 to Rp 775, Bank Dagang Nasional Indonesia by Rp 25 to Rp 600 and Bank Negara Indonesia by Rp 75 to Rp 800. (aly)

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