Rupiah continues to fall against dollar

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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