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.