Rupiah ends steady; BI measures help

Rupiah ends steady; BI measures help

Dow Jones/Jakarta

The Indonesian rupiah ended steady on Wednesday as Bank Indonesia's further measures to help the local unit seemed to bring some results, dealers said.

The dollar closed unchanged at Rp 10,360.

Dollar buying from margin trading speculators to cover short positions in the greenback prevented the local unit from appreciating, traders said. These speculators squared short dollar positions built above Rp 11,000 last week as Bank Indonesia later this month will ban dollar-rupiah margin trading.

The policy is part of the rupiah-support measures that the central bank announced Tuesday, which include raising its benchmark BI rate by 50 basis points to 10 percent.

"Trading was quiet and smooth, showing that the central bank's policies worked for the time being," a dealer with a local bank said. "Easing global oil prices were also positive for the rupiah."

Still, the market is waiting for further steps by the government, including cutting fuel subsidies to keep the state budget sustainable and improving the investment climate to bring in capital inflows, dealers said.

President Susilo Bambang Yudhoyono said last week that the government plans to cut fuel subsidies after October. But, Bisnis Indonesia daily Wednesday quoted a local senator as saying that the government might bring forward the cutting of fuel subsidies to October.

Dealers expect the market to remain calm on Thursday, with the dollar trading between Rp 10,200 and Rp 10,390.

Indonesian shares ended marginally higher on Wednesday, led by gains in cement blue chips on expectations of improved 2005 earnings due to rising domestic demand, dealers said.

Overall sentiment was cautious amid concerns over the rupiah, which hasn't strengthened despite a central bank move to raise a key interest rate to defend the currency, they added. At 0900 GMT, the U.S. dollar was trading unchanged at Rp 10,360.

The central bank Tuesday increased the benchmark Bank Indonesia Rate by 50 basis points to 10 percent in an effort to prevent steeper declines in the rupiah, which has dropped sharply against the U.S. dollar due to the impact of the high oil prices and the government's payment of oil subsidies.

"The main index came off its intraday high as investors swiftly took profit amid concerns over the movement of the rupiah," said a trader with a local securities firm.

The Jakarta Stock Exchange Composite index ended up 0.7 percent, or 7.786 points, to 1059.380, off its intraday high of 1063.638.

Gainers led decliners 73 to 34, with 66 stocks unchanged.

Volume rose to 958 million shares valued at Rp 1.2 trillion, compared with 850 million shares valued at Rp 853 billion on Tuesday.

Semen Gresik, the nation's largest cement maker, jumped 5.7 percent to Rp 16,600 on a rebound and expectations of solid 2005 earnings. "The company has the lowest financing cost and foreign exchange fluctuation risk" among cement makers, Kim Eng Securities said in a research note. The note added that Gresik's debts are mostly in rupiah.

Gresik's rival Indocement gained 3.4 percent to Rp 3,050 and Semen Cibinong advanced 4.7 percent to Rp 450, on bargain-hunting after recent falls.

Dealers said investors continued to buy crude palm-oil shares on expectations of improved 2005 earnings due to rising commodity prices.

Palm oil producer Astra Agro Lestari rose 2.9 percent to Rp 4,400 and rival London Sumatra gained 1.2 percent to Rp 2,175.

Profit-taking hit bellwether Telekomunikasi Indonesia, which fell 1 percent to Rp 5,200 and nickel miner International Nickel Indonesia, or Inco, which ended down 1 percent at Rp 15,500. Inco shares rose early this week due to expectations of solid 2005 earnings as its revenue is denominated in U.S. dollars.

Dealers said they expect shares to continue to trade higher Thursday on further buying in cement and plantation blue chips.