Rupiah extends gains as stocks plunge further

JAKARTA (JP): The rupiah continued to make headway against the U.S. dollar yesterday due to bullish sentiment on regional markets, especially the Japanese yen, currency dealers said.

Currency dealers said the strengthening yen helped lift sentiment on other regional currencies, including the rupiah.

"The short term yen appreciation against the American dollar sent a positive sentiment to regional markets, boosting the rupiah to touch the day's high of 12,650 to the dollar," a chief dealer with a local private bank said.

The rupiah, which opened at 12,750/12,850 to the dollar in the morning session, closed at 12,750/12,850, compared to Tuesday's close at 12,900.

The Japanese yen ended Asia trading at 143.38 against the U.S. dollar yesterday, slightly firmer from its close at 144.80 the previous day.

Currency dealers said that though the rupiah continued to gain ground, it failed to break the 12,500 level despite support from state banks.

"Though we saw certain state banks sell dollars for the rupiah, the impact on the rupiah was limited," the chief dealer said.

Some dealers said the rupiah was likely to cross the 12,500 level easily and was expected to test the 12,000 level soon provided there was no major development on the country's political and social fronts in coming days.

"However, when the rupiah passes through the 12,000 level, I think many operators will start selling the currency for dollars because at that level, the dollar would be considered cheap," a dealer with another private bank said.

He warned that rumors of a massive rally prior to the commemoration of the country's independence day on Aug. 17 would certainly kill the bullish sentiment on the rupiah.

Meanwhile, stockbrokers said the local stock market continued to book losses in line with the massive drops in the regional market and also on the Dow Jones index.

Stock prices on the Jakarta Stock Exchange (JSX) ended 4.24 percent lower yesterday with the main price index falling 19.27 points to close at 441.78.

Total turnover stood at 160.93 million shares changing hands valued at Rp 213.50 billion (US$16.67 million).

Losers led gainers by 87 to 15 with 76 stocks remaining unchanged and 110 stocks untraded.

Stock analysts attributed the sharp fall in stock prices on the local bourse to the drastic fall on Wall Street, which drove down all markets in the region.

"I think the sharp fall on Wall Street forced institutional investors in the local market to make major selloffs on blue-chip stocks," head of research of Trimegah Securindo Lestari David Chang said.

Associate director of Bahana Securities Andre Cita said that fears about Asia's financial crisis, which would adversely affect the American economy coupled with weaker corporate earnings for U.S. firms, had pulled down the Dow Jones industrial average by 299.43 points or 3.41 percent to 8,487.31 Tuesday.

"If the U.S. economy is going into recession, it will have an adverse impact on the economy of the whole region," he said.

Stock brokers said that most foreign institution investors, who had long held stocks of dollar value like PT Telkom, PT Indosat and PT Tambang Timah, pulled out of the local market yesterday.

The stock price of heavyweight state telecommunications firm Telkom slid Rp 300 to Rp 3,825 on 4.46 million shares traded, state international telephone call operator Indosat shed Rp 725 to Rp 13,100 on 150,000 shares, state tin mining firm Tambang Timah fell Rp 300 to Rp 8,000 on 385,500 shares traded.

Trimegah's Chang predicted that sluggish sentiment on the local bourse would continue in the next few days as concern over the country's instability remained high.

"Confidence and stability in the country's economy is still a big question for most foreign investors," he said. (aly)