Rupiah ends 8.3% higher against dollar

Rupiah ends 8.3% higher against dollar

JAKARTA (Agencies): The Indonesian rupiah ended 8.3 percent
higher against the U.S. dollar yesterday amid strong rumors on
currency trading floors in Singapore that Jakarta was set to
impose a tax on dollar purchases, dealers said.

The rupiah closed Asian trading at 9,400 against the dollar
from Thursday's close of 10,250.

Dealers said reports had quoted the directorate of tax
regulations as saying that a 5 percent tax would be slapped on
rupiah selling against all foreign currencies.

"When the market got wind of this, many players unwound their
long dollar positions," a dealer with a European bank said. "It
seems the tax is to deter speculators."

In Jakarta, a Bank Indonesia official said the central bank
would sign an agreement with the Customs and Excise Office to
enforce existing restrictions on the amount of rupiah cash that
could be carried into and out of the country.

The customs office and Bank Indonesia were to sign the
agreement at a ceremony in the Indonesian capital on Monday, a
bank official was quoted saying by AFX-Asia, an AFP-affiliated
financial news service.

Sani Hamid, analyst with U.S. research house Standard and
Poor's MMS in Singapore, said: "Things are still very vague. But
if it is true, then the tax could be a substitute to the much
talked about currency board in which the rupiah is to be pegged.

Sani also said that if assuming a 5 percent tax was slapped on
absolute amount of dollar purchases, "this would mean for every
one million dollars purchased against the rupiah, buyers will
have to pay a tax of US$50,000.

"If that is so, this will effectively slow down the dollar
trades to a trickle as this cost of trading is absurd.

The rupiah had dropped in value by 70 percent against the
dollar since mid-1997 when a currency crisis struck the region
and overwhelmed economies.

Other Southeast Asian currencies benefited from dollar sales
by U.S. investment houses in a market long on dollars.

The Malaysian ringgit crept toward 3.60 to the dollar on
positive sentiment ahead of Finance Minister Anwar Ibrahim's
statement on economic measures and Bank Negara's annual report
next week.

The Singapore dollar mirrored moves in the ringgit and yen,
gaining from heavy U.S. dollar sales by U.S. houses near its lows
of 1.6210/20. The market ignored news of a 28.1 percent yearly
rise in Singapore's February non-oil domestic exports.

The Philippine peso was better bid, reaching a high of 37.50,
as corporates and local banks offloaded dollars amid expectations
of fund inflows for equity and fixed income investments.

The Thai baht held under the 40.00 level on active dollar
sales linked to capital inflows after overnight squaring of
dollar longs in New York.

The Korean won firmed on active dollar sales. The central bank
denied a local media report that it had agreed with the IMF to
lower interest rates if the won remained in its current range for
about a week.

The Hong Kong dollar forwards were soft but off their lows
after an overnight sell-off on Chinese Premier Zhu Rongji's
pledge that China would defend the Hong Kong dollar peg at any
cost.