Rupiah climbs on market optimism as stocks gain

JAKARTA (JP): The rupiah strengthened for the third consecutive day yesterday on optimism that proposed financial aid from the International Monetary Fund (IMF) would help mend the country's monetary problem.

Currency dealers said that the rupiah rose sharply in late trading yesterday breaking the psychological level of 3,400 to close at 3,355/65 against the opening of 3,470/90 in the morning.

Currency dealers attributed the improvement of the rupiah to IMF's positive response to the Indonesian proposal and to dollars being sold by overseas fund managers, including the Quantum Fund controlled by George Soros, as well as profit taking by some domestic operators.

"The market has seen a sale of dollars by overseas operators, including financier George Soros," a local bank dealer said yesterday.

Foreign exchange dealers said a meeting between Minister of Finance Mar'ie Muhammad and Bank Indonesia governor J. Soedradjad Djiwandono with foreign fund managers helped build the market sentiment.

Mar'ie and Soedradjad briefed fund managers yesterday about the government's priority program in fixing the monetary problem.

"Though no clear financial package has been announced yet, the meeting has helped restore investor confidence in the meantime ... allowing the rupiah to gain ground," one local dealer said.

President director of Bank Internasional Indonesia (BII) Indra Widjaja said yesterday that the Indonesian government had made a very wise and prudent move to seek help from the IMF.

"Why should we be ashamed of seeking help if such help restores the country's economy?" he asked.

Currency dealers said the rupiah had strengthened to 3,310 against the greenback in midday trading but slid in the afternoon on a fresh demand for the dollar.

"The market expects the rupiah to strengthen to between 2,950 and 3,100 in early trade next week," a local bank chief said yesterday.

Indonesia's rupiah has lost over 35 percent of its value against the U.S. dollar since early July.

Currency dealers said Bank Indonesia did not intervene in the market yesterday like it did the previous three days.

"It's a psychological game now. Maybe the news about seeking help from the IMF has already been strong enough to mend public confidence, which has faded over the past few weeks," a dealer said.

Stock prices on the Jakarta Stock Exchange also bore fruit of the strengthening rupiah with the main price gauge rising 2.6 percent or 13.64 points to close at 534.75 points yesterday.

Total turnover was 555.4 million shares in the regular market valued at Rp 608.6 billion (US$181.1 million)

Other Southeast Asian currencies also consolidated further against the U.S. dollar, enjoying a reprieve after a turbulent few months since a currency turmoil erupted in the region.

The rebound boosted regional stocks but analysts said currency volatility could return if two awaited events -- the unveiling of the Malaysian budget and Thailand's financial rescue plan -- disappointed the fickle markets.

The Malaysian ringgit closed at 3.0670, up from 3.0825, while the Singapore dollar strengthened to 1.5330 from 1.5380 the day before, AFP reported.

The Thai baht firmed to 35.60 from 35.70 and the Philippine peso closed at 33.52, up from 34.12, after spiking to 32.93, forcing a break in trading under new rules that imposed a cooling-off period if the currency moved 3.5 percent either way.

The regional currency crisis began on July 2 when the baht's de facto devaluation devastated confidence in the entire region. Since then regional currencies have hit record lows, with the rupiah losing more than half of its value at one point. After gains this week, the rupiah was 38 percent lower than its level on July 1. (aly)

Table: Southeast Asian Currencies

July 1 Oct. 10 Pct. Fall Baht 24.70 35.60 -44% Rupiah 2,433 3,360 -38% Peso 26.37 33.52 -27% Ringgit 2.5245 3.0670 -21.5% Sing. dollar 1.4300 1.5330 -7.2%