Rupiah closes at 12-month low, index declines

Rupiah closes at 12-month low, index declines

Dow Jones, Jakarta

The rupiah ended at its lowest level in over 12 months on Tuesday as foreign funds, who dumped Indonesian shares last week, bought dollars, dealers said.

The dollar closed at Rp 8,720, up from its close of Rp 8,700 Friday. The local currency market was closed Monday for a public holiday. The last time the dollar traded around this level was April 28, 2003.

Foreign investors unloaded Indonesian stocks last week as concerns over China's economic tightening policies shook regional markets. The Indonesian stock market was also clouded by fresh sectarian clashes in the country's eastern town of Ambon.

The Jakarta Stock Exchange Index fell 3.2 percent last week, and dropped further by 0.5 percent on Tuesday.

Bank Indonesia allegedly sold the dollar to defend the rupiah, dealers said.

Bank Indonesia's Governor Burhanuddin Abdullah told reporters that the central bank will continue intervening in the market. Its goal, however, is to reduce the dollar-rupiah volatility, not to curb the dollar below a specific level, he added.

Bank Indonesia has said in the past that it is comfortable with a dollar level between Rp 8,200 and Rp 8,700. But Abdullah said the dollar's current level remained tolerable.

Dealers said the dollar looks poised to test Rp 8,750 Wednesday although the central bank is expected to intervene again. Any downward correction in the dollar is expected to be limited at Rp 8,675, they added.

Shares ended lower for the fourth consecutive session amid lingering local security concerns ahead of the presidential elections, dealers said.

They said overall sentiment remained cautious and weak, amid concerns following an explosion in Pekanbaru, Riau province, which killed two people. The explosion could raise local security concerns ahead of the presidential polls in July, they added.

"The market ran out of fresh leads after the long weekend," said a trader with a foreign brokerage. Indonesian markets were closed on Monday for a holiday.

Dealers said many investors stayed on the sidelines to await the outcome of the Federal Open Market Committee meeting on U.S. interest rates later Tuesday.

The Jakarta Stock Exchange Composite Index ended down 3.810 points, or 0.5 percent at 779.603.

Decliners led gainers 65 to 42, with 83 stocks unchanged.

Volume was 959 million shares valued at Rp 916 billion ($105 million).

Gudang Garam led decliners, falling Rp 550, or 3.8 percent, to Rp 14,050 on profit-taking, after the company said its first quarter net profit rose only 8.5 percent on year, below market expectations.

Also lower were nickel miner International Nickel Indonesia, or Inco, down Rp 3,000, or 8.8 percent, at Rp 31,000, and Bank Rakyat Indonesia, down Rp 100, or 5..8 percent, at Rp 1,625.

Indonesian Satellite Corp. and car maker Astra International bucked the trend after they reported solid first quarter earnings.

Indosat gained Rp 150, or 3.8 percent, to Rp 4,125 and Astra International rose Rp 300, or 5.3 percent, to Rp 6,000.

Dealers said they expect the market Wednesday to trade flat to slightly higher on bargain-hunting after falling 4.7 percent in the previous four sessions.