Rupiah dealth another blow at week's end

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.