Rupiah falls again on mounting fears

Rupiah falls again on mounting fears

JAKARTA (JP): Mounting concerns over demonstrations by
university students, demanding major economic and political
changes, prevented the rupiah from making headway against the U.S
dollar yesterday, currency dealers said.

The rupiah, which opened at 7,900 in the morning session,
broke the resistance level of 8,000 to 8,050 before the lunch
break, riding on investors concerns that student demonstrations
might turn into mass violence in the coming days, they said.

"If this happens, foreign investors will turn away from
Indonesia," a chief dealer with a local private bank said.

The rupiah closed at 7,950 against the dollar yesterday, lower
than the previous day's close of 7,800.

The dealer also attributed the rupiah's fall to a contagion
effect from the weakening Japanese yen against the dollar and
apprehension over the government's commitment to fully
implementing the reforms prescribed by the International Monetary
Fund (IMF).

"The fall in the Japanese yen against the American dollar also
caused the rupiah to decline."

However, most dealers said market talk that the central bank,
Bank Indonesia, would soon raise the rates of its short-term
promissory notes (SBI) had barred the rupiah from falling further
yesterday.

Some overseas operators unloaded their dollars for rupiah in
the afternoon to anticipate the rupiah's strengthening from
possible rate increases today.

"There is strong market speculation that the central bank will
raise its SBI rates on Friday (today) to stabilize the rupiah,"
they said.

Currency dealers said most foreign investors were now closely
watching the development of debt negotiations between Indonesia
and its foreign lenders in New York over the country's mounting
private sector debts of US$68 billion.

"Any significant outcome from the debt talks will help the
rupiah to make headway in the coming days," another bank dealer
said.

As the rupiah fell, stock prices on the Jakarta Stock Exchange
(JSX) closed marginally lower yesterday on investors' persistent
selling pressures and market fear that the central bank would
raise SBI rates to stabilize the rupiah, stockbrokers said.

Brokers said most foreign brokerage houses like Jardine
Fleming Nusantara, Indosuez WICarr, Credit Lyonnais, ING Barings
Securities, Peregrine Sewu Securities and GK GOH Ometraco were
among the net sellers.

"Most foreign investors sold their stocks for fear that
interest rates will be raised," a broker with Trimegah Securities
said.

The JSX Composite index closed 3.37 points lower to 510.06
points on a total turnover of 505.87 million shares changing
hands worth Rp 592.96 billion (US$75.05 million). (aly)