Rupiah closes lower on debt woes, other currencies weak
Rupiah closes lower on debt woes, other currencies weak
JAKARTA (Dow Jones): The Indonesian rupiah closed lower
Tuesday as the markets ignored a 50-basis-point cut in U.S.
rates, focusing instead on local company's demand for dollars to
repay debt.
The dollar was quoted between Rp 9,520 rupiah and Rp 9,560
late Tuesday, much higher than Rp 9,310 to Rp 9,340 Monday.
"The market was driven by real demand for dollars from local
corporates," a local trader said.
Bank Indonesia sold about $30 million to $50 million through
brokers in the market to try and help the rupiah, but to no
avail, according to Jakarta-based bankers.
External events failed to affect the rupiah, which is heading
lower mainly because of the country's huge debt burden. Public
debt alone is equal to a year's gross domestic product.
Interbank trade in the market was much lower than corporate
demand, traders said.
News that the ruling Taliban had urged Afghans to prepare for
a Holy War against the U.S. in the event of an attack brought the
dollar off its highs against some Asian currencies Tuesday, but
it had little effect on the rupiah.
Markets are concerned a U.S. attack on Afghanistan after last
week's terrorist attacks in the U.S. could lead to war. Such an
escalation in violence could hurt the dollar as a safe haven for
investors.
The Taliban is shielding suspected terrorist Osama bin Laden,
the prime suspect in last week's attacks that devastated the
World Trade Center in New York and the Pentagon in Washington.
Earlier in the day, in the Asian currency markets, the dollar
found solace from a flurry of interest rate cuts overnight by
several of the world's most influential central banks. Their
resolve to stabilize the markets and protect the global economy
helped calm nerves in foreign exchange markets.
The U.S. Federal Reserve initiated the coordinated policy
easing, slashing interest rates by half a percentage point to 3
percent. The European Central Bank, which also lowered interest
rates by half a percentage point, was among the other major
central banks that followed suit.
The U.S. Federal Reserve's decision to cut interest rates by
50 basis points to 3 percent Monday brought some respite to the
dollar in early Asian trade. But the dollar's rise may not be
sustainable if war breaks out, analysts say.
The Bank of Japan is widely expected to announce Tuesday - a
day ahead of its original schedule - an easing of its already
ultra-loose monetary policy.
Still, the dollar remains wobbly, amid concerns over a
possible recession in the U.S. and uncertainty over the nature
and scope of U.S. military retaliation against the perpetrators
of the terrorist attacks, currency watchers said.
The Singapore dollar was weaker at S$1.7364 against its U.S.
counterpart, compared with S$1.7325 late Monday.
The relative strength of the Singapore dollar against the
currencies of its major trading partners stoked fears of central
bank intervention, especially after the Business Times newspaper
reported Tuesday the Monetary Authority of Singapore is ready to
act if U.S. financial markets deteriorate following last week's
terrorist attacks.
In the Thai currency market, unconfirmed talk by some dealers
that Bank of Thailand had bought dollars below 44 baht Monday
through its agent banks in Singapore kept the U.S. currency
supported.
The baht was weaker at 44.225 baht to the dollar, compared with
44.010 baht late Monday.
In Seoul, the dollar finished at 1,296.9 won, down from
1,298.7 won Monday.
Oil importers in South Korea continued to buy dollars to
hedge, amid fears of a spike in oil prices, especially if the
U.S. retaliates for the attacks against an oil-producing country
or region, dealers said. South Korea is a net importer of oil.
On the Philippine Dealing System, the dollar closed at 51.370
pesos, up from 51.260 pesos Monday.