Rupiah down as support wanes
Rupiah down as support wanes
The Jakarta Post, Jakarta
The rupiah ended its three-day advance against the U.S. dollar,
as central bank support appeared to run out of steam with the
government yet to unveil more concrete fiscal policies to help
strengthen the nation's recently beleaguered currency.
The rupiah began slipping again against the greenback, closing
down by a slight 0.93 percent at Rp 10,320 on Monday, as compared
to its Rp 10,225 closing last Thursday.
Monday's fall came as several Asian currencies gained on the
dollar on the back of the greenback's recent weakening against
the euro and the Japanese yen as the impact of Hurricane Katrina
cast doubt on U.S. economic prospects.
The Jakarta Stock Exchange Composite Index also closed down by
0.32 percent at 1,035.89 points, though pressure on share prices
appeared not to be a spillover from negative sentiment against
the rupiah, but more to do with the recent revision by global
rating agency Standard and Poor's (S&P) of its Indonesian credit
ratings.
S&P affirmed last week Indonesia's B+ long-term foreign
currency and BB long-term local currency sovereign credit
ratings, but revised their outlooks from positive to stable. On
Monday, S&P also cut its rating outlooks for Bank Mandiri, Bank
Negara Indonesia, Bank Danamon, Telkom and Indosat to stable from
positive.
Indonesian financial markets were closed on Friday due to a
national holiday.
The rupiah suffered a ten-day slide against the greenback late
last month, tumbling to a four-year low, and narrowly escaping Rp
12,000 per dollar, as record-high oil prices jeopardized the
country's fiscal stability and shook market confidence in the
currency.
The rupiah only managed to make a rebound after Bank Indonesia
(BI) came to the rescue with a six-point monetary policy package
last week, which included effectively hiking its benchmark BI
Rate to 9.5 percent, raising its one-week overnight rate to 8.5
percent, and increasing the minimum reserves that commercial
banks are required to deposit with the central bank to 5 percent.
On Monday, the central bank continued its all-out efforts to
help the ailing rupiah, hiking its overnight rate to 13.52
percent -- from the previous 10.82 percent -- and offering its
Fine Tune Kontraksi deposits -- to absorb a total of Rp 17.05
trillion (some US$1.7 billion) in excess market liquidity.
The rate hike could prove helpful for the rupiah as it will
further encourage banks to fulfill the new minimum reserve
requirement, which will come into effect on Tuesday.
Earlier in the day, Minister of Energy and Mineral Resources
Purnomo Yusginatoro reaffirmed during a hearing with the House
that the government planned to gradually hike domestic oil-based
fuel prices -- including kerosene, which is used by many of the
country's low-income families -- until they reached market levels
by 2007.
Calls to hike fuel prices to cut budget-burdening fuel
subsidies have recently surfaced as a solution to help the
rupiah.
Doing so is, however, a political sensitive decision for the
government, whose last fuel price hike in March sparked
widespread protests and pushed the inflation rate up to 8.81
percent.