Rupiah ends at eight-month low on dollar demand

Rupiah ends at eight-month low on dollar demand

Jakarta, Dow Jones

The rupiah ended at an eight-month low on Tuesday on robust
month-end dollar demand and continued selloffs in local stocks,
dealers said.

A powerful 8.7-magnitude earthquake that devastated a small
island off North Sumatra on Monday night added to the negative
sentiment in the local unit, they added.

The dollar closed at Rp 9,505, up from Monday's close of Rp
9,435. The last time the dollar closed around Rp 9,505 was in
early June 2004.

They said most of the dollar demand came from local units of
multinational corporations operating in Indonesia, especially
Japanese ones, as they will be expatriating profits at the end of
this month.

"The dollar demand from foreign equity investors were also
quite significant following the continued slide on the local
stock market," a dealer with a foreign bank said.

The Jakarta Stock Exchange Composite Index fell 2.7 percent
Tuesday amid expectations of rising interest rates in the U.S.
and Indonesia, dealers said.

Expectation of rising rates also led to a cancellation of the
government's Rp2 trillion bond auction as investors were
demanding high yields.

Dealers said that news of the latest disaster in Nias Island,
where hundreds are feared dead, added to the negative mood on the
rupiah as it could raise the reconstruction costs associated with
the December tsunami. The immediate impact of the latest calamity
on the national economy, however, is expected to be insignificant
as there are no major industries in the affected area.

Dealers said Bank Indonesia intervened to slow the dollar's
rise Tuesday, but they estimated the amount of dollars the
central bank unloaded was small.

Bank Indonesia is believed to often enter the market when the
local unit is under selling pressure.

Dealers expect the dollar to trade between Rp 9,475 and Rp
9,550 on Wednesday, with Bank Indonesia expected to sell the
greenback again.

Meanwhile, concerns of the earthquake impacts, and lingering
worries that the central bank may raise interest rates to combat
rising inflation and defend the rupiah, pushed the index down.

The Jakarta Stock Exchange Composite Index ended down 29.940
points, or 2.6 percent, at 1070.30 , up slightly from an intraday
low of 1056.51.

"The market worried that the reconstruction costs stemming
from the earthquake will further hurt the 2005 state budget,"
said an analyst with Kuo Capital Securities.

Decliners led gainers 162 to 12, with 43 stocks unchanged.

Volume was 4.2 billion shares valued at Rp 3.3 trillion,
compared with 2 billion shares valued at Rp 1.6 trillion on
Monday.

Dealers said investors continued to sell bank stocks on
worries that higher interest rates would hurt the banks'
financial performance.

Bank Mandiri, the nation's largest lender, fell 1.2 percent to
Rp 1,670, Bank Negara Indonesia (BNI) lost 3.9 percent to Rp
1,720, and Bank Danamon dropped 5.7 percent to Rp 4,575.