Rupiah continues to fall as other currencies recover

Dadan Wijaksana, Jakarta

The rupiah continued to falter on Thursday and ended at a fresh 19-month low, showing no sign of a rebound at a time when other currencies in the region started to regain ground against the U.S. dollar.

The local unit closed at 9,290 per dollar, down from 9,275 the day before -- the weakest since Oct. 14, 2002 -- with dealers pointing fingers in part at local firms building up their dollar stocks to cover debt repayment and the cost of imports.

The companies continued to buy dollars on fears that the local currency could fall further in anticipation of an imminent rise in the U.S. benchmark interest rate -- which should make dollar- dominated assets a more attractive investment.

"So, I guess this is their way of stemming or reducing the losses they have suffered from the rupiah's recent decline," a dealer at a state bank said on Thursday.

Thursday's drop capped the rupiah's shaky showing in recent weeks, while regional peers have managed to recover from U.S. dollar pressure, which recently picked up on optimism about the U.S. economy.

The local unit has so far depreciated by close to 9 percent since January, a loss that exceeds the gain of 7 percent it made last year.

In comparison, on Thursday, the Singapore dollar ended at its highest level for more than two weeks while the Philippine peso also gained. The most impressive showing was probably shown by the Korean won, which closed as its highest level for three weeks.

In addition to external factors, the dealer said the rupiah had also fallen victim to the country's heightened political atmosphere in the run-up to the unprecedented, direct presidential elections.

Indonesia will hold the elections on July 5, with a possible runoff on Sept. 20, should the winner in the first stage of voting fail to secure at least 50 percent of the vote.

Despite all the pressure, Bank Indonesia says it has yet to consider raising its one-month promissory note (SBI) interest rate, provided the U.S. Federal Reserve's interest rate hike was no greater than 0.25 percent.

Analysts have said that, among other things, a rise in SBI rate should help stem rupiah depreciation to draw interest in holding the rupiah.

Turning to the stock market, the Jakarta stock index took advantage of gains posted in Asian markets, closing higher for the second day in a row.

The index ended 1.4 percent higher at 728.31 points from the previous day, as a blue-chip share sell-off sparked the market, dealers said.

Cigarette giant Gudang Garam led the 67 gainers on the day after rising by 4.1 percent, or Rp 550, to close at Rp 14,100.

The country's largest and second-largest telecommunications firms -- Telkom and Indosat -- were also among the gainers, up by 2.1 percent and 3.9 percent to close at Rp 7,350 and Rp 4,000 respectively.

Astra International, the nation's largest auto maker, closed at Rp 5,750, 1.8 percent higher than the previous close.