Rupiah ends higher as foreigners sell dollars

Rupiah ends higher as foreigners sell dollars

Dow Jones Jakarta

The rupiah continued recovering on Wednesday as foreign investors exchanged dollars to settle their recent purchases of local bonds, dealers said.

The dollar dipped briefly below the Rp 10,000 mark earlier in the day, touching Rp 9,990. It was the dollar's lowest level since Aug. 22. The greenback ended at Rp 10,005 versus its close on Tuesday at Rp 10,075.

"The dollar's dip below Rp 10,000 could be an early signal that the rupiah crisis is over," a dealer with a foreign bank said. "It most likely will try to make a clean break below Rp 10,000 tomorrow."

Foreign investors came in large numbers recently, snapping up undervalued government bonds after the government and the central bank took steps to support the rupiah, including raising interest rates and making plans to cut fuel subsidies.

Dealers, however, said profit-taking drove bonds prices slightly lower on Wednesday. Still, they expect the profit-taking to ease in the coming days.

Dealers expect the dollar to trade between Rp 9,990 and Rp 10,020 on Thursday.

Meanwhile, the shares ended sharply lower on Wednesday, led by selling in bellwether Telekomunikasi Indonesia (Telkom) on renewed expectations that its 2005 earnings will be eroded by foreign exchange losses brought about by the weak rupiah, dealers said.

They said news that the government will likely hike fuel prices significantly early next month continued to discourage investors, as it could push up the operating costs of many Indonesian companies, hurting their 2005 earnings.

"Investors also fear the fuel price hikes could spur students and other people to stage demonstration," said a trader with a local securities firm.

The Jakarta Stock Exchange Composite index ended down 2.5 percent, or 27.117 points, at 1058.627.

Decliners led gainers 98 to 25, with 70 stocks unchanged.

Volume fell to 1.25 billion shares valued at Rp 1.2 trillion, compared with 1.4 billion shares valued at Rp 1.3 trillion on Tuesday.

Telkom fell 4.7 percent to Rp 5,050, on expectations it will book a lower net profit for 2005 on increased foreign exchange losses. Telkom has debts of around US$750 million, analysts said.

Dealers said worries over fuel price increases also hit automotive company Astra International, which lost 3.6 percent to end at Rp 10,650, and consumer goods producer Unilever Indonesia, which ended down 5.6 percent at Rp 3,825.

Shares in nickel miner International Nickel Indonesia, or Inco, bucked the trend, rising 1 percent to Rp 14,600 on bargain hunting after recent falls from profit taking.

Dealers said they expect shares to trade slightly higher Thursday on bargain hunting following a drop of 4.3 percent on the main index over the previous two sessions.