Rupiah ends lower on rising global oil prices
Rupiah ends lower on rising global oil prices
Dow Jones, Jakarta
The rupiah closed at more than a six-week low on Monday as rising
global oil prices are threatening the sustainability of the
government's budget, dealers said.
The dollar closed at Rp 9,885, compared with its close on
Friday at Rp 9,805. The last time the dollar closed around this
level was July 5, when it ended at Rp 9,883.
The dollar touched an intraday high of Rp 9,892, but suspected
intervention by Bank Indonesia helped the local unit a bit.
Dealers estimated that the central bank sold around US$40 million
in the spot market on Monday.
"The market was worried that the fuel subsidy in the state
budget will become unbearable," a dealer with a foreign bank
said. "The dollar will likely continue rising in the coming days
as there are no signs that oil prices will ease."
Dealers expect the dollar to trade between Rp 9,850 and Rp
9,900 on Tuesday.
Meanwhile, Indonesian shares ended sharply lower on Monday as
investors continued to pare their equity portfolios as they
feared that the rupiah may weaken further due to rising oil
prices, dealers said.
High oil prices will mean that the government will have to
spend more on oil imports, which in turn will widen the nation's
budget deficit this year. Indonesia is a net oil importer.
Dealers said high oil prices could also force the government
to increase fuel prices soon, which in turn could result in
social unrest.
The Jakarta Stock Exchange's Composite Index ended down 3.1
percent, or 35.695 points, to hit a five-week closing low at
1118.274.
Decliners led gainers 144 to 6, with 38 stocks unchanged.
Volume rose to 1.67 billion shares valued at Rp 1.5 trillion,
compared with 1.25 billion shares valued at Rp 1.7 trillion on
Friday.
"The government may have to take the politically sensitive
move of increasing domestic fuel prices," said Baradita Katoppo,
the head of research at Kim Eng Securities, in a research note.
Analysts feared that the government's decision to increase
fuel prices will face strong opposition from students and people
at the lower rungs of society.
Dealers also attributed the selloff to lingering concerns
about interest rates after the central bank last week raised its
key interest rate to 8.75 percent from 8.50 percent due to rising
inflation.
Bank blue chips led the decliners on expectations that the
rate hike could reduce the interest margins of banks and push up
the nonperforming loans of finance companies.
Bank Mandiri, the nation's largest lender by assets, fell 4.2
percent to Rp 1,580, Bank Central Asia dropped 2 percent to Rp
3,425 and Bank Rakyat declined 4.2 percent to Rp 2,825.
Finance company Adira Dinamika Multi Finance lost 18 percent
to Rp 2,125.
Elsewhere, bellwether Telekomunikasi Indonesia lost 2.8
percent to Rp 5,200 and rival Indonesian Satellite fell 3.5
percent to Rp 5,600.
Dealers said they expect shares to trade flat to slightly
higher Tuesday on a rebound after falls in the previous four
sessions.