Rupiah dealth another blow at week's end

Muninggar Sri Saraswati, The Jakarta Post/Jakarta

It was definitely not a "Thank God, it's Friday" week's end for Indonesia as the rupiah suffered another blow with the market seeing the currency close at Rp 10,400 against the U.S. dollar, the lowest since January 2002.

High demand for the greenback, particularly from state oil and gas firm PT Pertamina to pay its oil imports at a time when oil prices are soaring, was blamed mainly by dealers for the rupiah's slump.

With global oil prices hovering at US$60 per barrel -- and hitting $67.30 in New York and $65.99 in London respectively for October delivery -- Pertamina needs to dig deeper into its pocket to secure imports.

At the current levels, Pertamina finance director Alfred H Rohimone said the firm needed monthly funds of $1.6 billion to import 400,000 barrels of crude oil and 300,000 barrels of refined fuel products.

President Susilo Bambang Yudhoyono met with the former governors of Bank Indonesia (BI), the central bank, at 9 p.m. last night at the Presidential Palace. The move, according to presidential spokesman Andi Mallarangeng, was to "show the President's seriousness in addressing the nosediving rupiah against the dollar".

BI governor Burhanuddin Abdullah said after the meeting that the central bank was keeping all options open to help support the local currency, including raising reserve requirements for banks, monitoring and curbing currency trading as well as increasing key interest rates.

The meeting was the second in two days, after Susilo also arranged an impromptu meeting with the BI on Wednesday, but his actions -- or rather remark, that the government would coordinate with the central bank on the issue -- did little to help stem the rupiah's decline.

A weaker rupiah makes imports -- a major component in many local companies -- more expensive. More importantly, market perception toward the currency should reflect its confidence in the whole economy.

Coordinating Minister for the Economy Aburizal Bakrie said after the Cabinet meeting that state utility firm PT PLN should reduce the use of petroleum for its power plants.

"If we reduced fuel consumption, we would use less dollars to import oil and therefore, the rupiah would strengthen," he said.

Aburizal also said that Susilo wanted the contract between Pertamina and ExxonMobil over the Cepu block to be materialized before Sept. 25, in a bid to increase domestic fuel production.

The untapped Cepu block, located on the border of Central Java and East Java, is expected to produce 170,000 barrels per day (bpd).

Meanwhile, the Ministry of Finance's Director General of the Treasury Mulia Nasution said that the government would soon convert between $400 million and $500 million worth of foreign exchange reserves at the central bank to help boost the rupiah.

"Early next week, the government will convert (part of) its dollar funds deposited currently at Bank Indonesia into rupiah in the (foreign exchange) market," he was quoted as saying by Dow Jones..

The falling rupiah was followed by the sliding index, after it improved slightly on Thursday. The Jakarta Stock Exchange's Composite Index ended down 1.2 percent at 1,048.87.