Rupiah down slightly after Bali blasts

Rupiah down slightly after Bali blasts

Dow Jones, Jakarta

The Indonesian rupiah ended slightly lower on Monday following weekend blasts on the tourist resort island of Bali, showing the local market's resilience to security disturbances in the country, dealers said.

The dollar closed at Rp 10,310 versus its close on Friday at Rp 10,290. The greenback rose early to a one-month high of Rp 10,460 in illiquid trading on a knee-jerk reaction to the Saturday terrorist attacks that have claimed 27 lives and injured hundreds, mostly holiday-makers.

But foreign investors took the dollar's rise as an opportunity to sell, driving the currency down to an intraday low of Rp 10,250.

The dollar finally settled above the Rp 10,300 mark as local companies accumulated the unit to hedge offshore debts amid the unit's global strength, dealers said.

"The market reacted to the Bali bombings surprisingly well, showing that investors are used to security disturbances after a string of bombs here in the last five years," a dealer with a foreign bank said.

In the past, the market's reaction to such terror attacks has been short-lived. The dollar rose to Rp 9,400 from around Rp 9,000 in the weeks after the 2002 Bali bomb attacks that killed 202 people, then slid to the pre-attack level within three months.

Bank Indonesia Deputy Governor Aslim Tadjuddin told Dow Jones Newswires he expects the rupiah to remain stable, and that the bombings won't affect the entire country. He also said the government's raising of fuel prices by more than 100 percent over the weekend will help ease pressure on the rupiah.

"The fuel price hike will reduce real consumption of fuel as well as fuel smuggling," he said. "This will reduce our fuel imports and consequently ease dollar demand."

The market seemed to agree, with dealers saying that cutting the fuel subsidy will cause short-term pain for the economy, but bring benefits over the long run.

Dealers expect the dollar to trade between Rp 10,270 and Rp 10,370 on Tuesday.

Meanwhile, shares ended higher on Monday as foreign program buying in select mining and bank blue chips lifted the main index from the lows it hit earlier in the day following the weekend's bombings on the resort island of Bali, dealers said.

"Gains in the main index showed that the Indonesian equity market is resilient," said Adrian Rusmana, the head of research at BNI Securities.

The Jakarta Stock Exchange's Composite Index ended up 0.4 percent, or 4.139 points, at 1083.414, up from an intraday low of 1055.149. The index fell roughly 20 percent the day after the 2002 attack, but within three months it had regained its pre- attack level.

Decliners led gainers 53 to 49 with 66 stocks unchanged. Volume fell to 1 billion shares valued at Rp 1.4 trillion compared with 4.2 billion shares valued at Rp 5.6 trillion on Friday.

Gas distributor PT Perusahaan Gas Negara (PGN) led the gainers, jumping 15 percent to Rp 4,800 on foreign program buying due to its solid outlook.

Analysts say PGN will benefit from structural changes in Indonesia's primary energy consumption which will see increasing use of gas as a result of the removal of oil subsidies and the consequent rise in the cost of fuel.

Dealers said they expect shares to trade higher on Tuesday led by further buying in select mining blue chips.