Rupiah continues to fall against dollar

JAKARTA (JP): The rupiah plunged again yesterday to a record low as the stock exchange bore the brunt of the worsening currency crisis.

Foreign exchange dealers said the rupiah slumped to a new historic low of 3,470 in the morning session before recovering to 3,370/3,400 at close against 3,270/90 on opening.

Dealers attributed the rupiah's plunge to the rise of U.S. dollar overnight rates in the local market, the sharp fall of other regional currencies and the high demand for the American dollar.

"I cannot judge what factor plays a more dominant role for the weakening rupiah but these four factors have pushed the rupiah to a new low," a senior dealer with Bank Bali said.

He said that overnight rates for American dollar increased to 20 percent yesterday from less than 10 percent previously.

"The rise of overnight rates will surely attract more people to buy dollar," the dealer said.

"Though there is strong demand by local companies to buy dollar, the volume is relatively small," the dealer said.

Almost all Southeast Asian currencies plunged to their lows yesterday amid scenes not witnessed since the Thai baht's shock flotation in early July.

According to analysts, the currency upheaval is entering its second phase.

Bank Indonesia's Governor Soedradjad Djiwandono said the rupiah's fall this week was largely attributed to the increase in demand for American dollars from local companies.

Soedradjad said many companies bought dollars to pay their dollar-denominated debts.

"But hopefully not many companies are looking for the American dollar," he said after the swearing in ceremony of members of the House of Representatives and the People's Consultative Assembly.

Economists estimated that the demand for U.S. dollar would remain significant in the future, given the high amount of private offshore loans.

According to data from business consulting firm The Castle Group, Indonesian private offshore debts reached US$55.52 billion last year, of which about $34.24 billion would mature in less than a year.

Soedradjad also attributed the rupiah's fall yesterday to the decline of other currencies in the regional forex markets.

"It sounds over defensive... but most regional currencies depreciated against the American dollar and there is a strong demand for buying dollar everywhere in the region," he said.

He declined to say whether the central bank would raise the interest rates to help shore up the falling rupiah.

Soedradjad said Bank Indonesia would stick to its commitment to gradually lower the interest rates of its short-term paper, SBIs to ease the tight liquidity which has severely hit business activities.

But he said the rates cut would be made only when conditions were favorable.

"The current monetary condition forces us to be more careful," he said.

Stock trading bore the brunt of the worsening currency crisis, with the Composite Index, the main price barometer at the Jakarta Stock Exchange, losing 1.77 percent to close at 536.99 after a slight increase in the previous day.

The turnover was relatively small, with only about 318.24 million shares changing hands yesterday on the regular market at a transaction value of Rp 393.80 billion ($119.33 million).

Securities analysts said the market would remain bearish in the short-term due to continued uncertainty in the currency market and the weakening rupiah.

"The fall of the rupiah has renewed concerns that more and more companies will be badly hurt by the rupiah's sharp depreciation," an analyst with a local securities house said.

Another analyst said yesterday that some commercial banks had also indicated the rise of the time deposit rates to attract more depositors.

"With the increase of time deposit rates, stocks will become less attractive," the analyst said.

Most blue chip stocks lost ground with state telecommunications firm PT Telkom falling by Rp 75 to Rp 3,550, Gudang Garam by Rp 225 to Rp 9,275, HM Sampoerna by Rp 100 to Rp 6,650, Bank Internasional Indonesia by Rp 100 to Rp 850, BNI by Rp 25 to Rp 875 and Bimantara Citra by Rp 125 to Rp 3,225. (aly)

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