Rupiah ends down on dollar demand

Rupiah ends down on dollar demand

Dow Jones, Jakarta

The Indonesian rupiah lost further ground and closed lower on Tuesday as dollar demand from local importers continued to weigh on the local unit, dealers said.

The dollar closed at Rp 9,825, up from Rp 9,810 on Monday.

Indonesia's imports have been rising steadily since last year as business activities pick up amid an improving domestic political climate. The increase in imports, however, is depressing the rupiah, as exports growth is still relatively slower.

Also, capital inflows are declining, with an absence of sales of state assets.

Dealers said the rupiah could get a boost from the planned purchases of shares in Lippo Bank and Bank Buana by investors from Malaysia and Singapore for a combined value of around US$620 million. The purchases could add dollar supply to the market when the deals are settled.

Still, analysts widely expect high global oil prices and rising interest rates in the U.S. to continue to weigh on the rupiah.

Finance Minister Jusuf Anwar said late Monday that the rupiah, which has averaged Rp 9,412 to the dollar in the January-to-June period, is unlikely to appreciate significantly in the second half of the year. This makes the Rp 9,300-to-a-dollar assumption in the 2005 state budget unrealistic.

Dealers expect the dollar to trade between Rp 9,790 and Rp 9,840 on Wednesday.

Meanwhile, Indonesian shares ended marginally higher on Tuesday, with a rebound in bank blue chips keeping the main index in positive territory, dealers said.

However, a trader with Andalan Artha Advisindo said that overall sentiment remained cautious, weighed down by lingering concerns over the volatility of the rupiah and a suspected bird- flu outbreak in the capital.

Bird flu has been suspected in the deaths of three people in Indonesia.

The Jakarta Stock Exchange's Composite Index ended up 3.577 points, or 0.3 percent, at 1132.017. The main index had fallen 0.8 percent over the previous two sessions.

Gainers beat decliners 69 to 46, with 79 stocks unchanged. Volume was 1.7 billion shares valued at Rp 981 billion, compared with 1.55 billion shares valued at Rp 957 billion on Monday.

Bank Mandiri, the nation's largest lender by assets, rose 2.7 percent to Rp 1,530 on expectations of improved first-half earnings, rebounding after falls in the previous three sessions.

Bank Negara Indonesia, the nation's third largest lender by assets, gained 1.8 percent to Rp 1,670 on expectations that the government will soon name an adviser and underwriter for its plan to sell a stake of up to 30 percent in the bank later this year.

Bank Lippo rose 0.7 percent to Rp 1,480 on further buying after news that the Swissasia consortium sold a 52 percent stake in the bank to Malaysia's Khazanah. Bank Rakyat Indonesia rose 0.9 percent to Rp 2,975 on bargain hunting after sharp falls on Monday.

Dealers said gas and oil producer Medco Energi continued to succumb to selling pressure after it announced plans to sell a 30 percent stake via a global depositary receipt issue at current prices. Medco said an application has been made to list the GDSs in Luxembourg and to trade in London and on Nasdaq's Portal market. Medco dropped 2.9 percent to Rp 3,300.

Dealers said they expect Indonesian shares to trade slightly higher on Wednesday on further buying in bank blue chips.