Rupiah continues to fall as other currencies recover
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.