Rupiah falls on minister's comment

Rupiah falls on minister's comment

JAKARTA (JP): After rallying persistently since the beginning
of the month, the rupiah slid back to close at 7,800 against the
U.S. dollar on Thursday as the market punished a senior Cabinet
minister for commenting that the rupiah should not appreciate too
rapidly.

Currency dealers attributed Thursday's 9 percent decline in
the rupiah mainly to the market's negative response to a
controversial statement by Coordinating Minister for Economy,
Finance and Industry Ginandjar Kartasasmita, who on Wednesday
said that an ideal range for the rupiah was between 7,000 and
8,000 to maintain the competitiveness of Indonesia's exports.

"Although there were several factors affecting the rupiah
today, Minister Ginandjar's statement was the dominant factor
behind the fall of rupiah," a chief dealer with a local private
bank said.

He said the fall of the Japanese yen to 117 against the dollar
on Thursday was also partially responsible for the rupiah's
slide.

The rupiah opened strongly at 7,150 to the dollar -- exactly
the same as Wednesday's close -- but then weakened to as low as
7,900 before closing Jakarta trading at 7,800.

The rupiah hit an eight month high of 6,950 against the dollar
at one point on Wednesday -- having improved by almost 50 percent
from its level of around 12,000 in September.

Currency dealers said that Ginandjar's remark caused massive
dollar-buying by offshore operators, especially in Singapore.

In an apparent move to stem the rupiah's slide, dealers said,
state-banks unloaded dollars for the rupiah but failed to prevent
the currency from declining further.

Dealers said that some state banks sold dollars for rupiah at
exchange rates of 7,200, 7,400, and 7,800.

"But massive dollar buying by offshore operators was higher
than the value of dollars sold by state banks," the chief dealer
said.

Ginandjar said on Wednesday that a further appreciation of the
rupiah against the dollar would hurt the competitiveness of the
country's exports.

"I personally expect the rupiah will not strengthen to above
the 5,000 level because it will hurt our exports," Ginandjar
said.

Minister of Industry and Trade Rahardi Ramelan on Thursday
dismissed fears that the strengthening rupiah would adversely
affect the country's exports. He contended that Indonesian
exporters would be flexible in responding to the situation.

As the rupiah slid on Thursday, Ginandjar denied any intention
on his part to curtail the rupiah's rally against the dollar.

"We don't have any intention of curbing the rupiah at that
level (7,000), or of stopping it from getting stronger than
7,000," he told journalists on the sidelines of a seminar.

He described the weakening of the rupiah on Thursday as a
"natural correction" and pointed out that other regional
currencies had also fallen in the foreign exchange markets.

When Indonesia's economic fundamentals were improving and
regional currencies were also improving, the rupiah rode on the
back of that good news, he said.

Bank Indonesia Director Miranda S. Goeltom said at the same
seminar that the rupiah's recent gains were boosted by a
declining dollar demand in the market.

She said that offshore players, especially from Singapore,
actually expected the rupiah to continue to strengthen as
exporters began converting their dollar into rupiah.

"It is not true if people say that Bank Indonesia has
intervened," she said, adding that a rupiah-dollar exchange rate
of between 7,000 and 8,000 would still be competitive for
exporters.

"There is still room for the rupiah to go to around the 6,500
level as long as there are no external shocks," she said.

The year-end target agreed to between the government and the
International Monetary Fund (IMF), which arranged a multi-billion
dollar bailout fund for Indonesia, is 10,000.

The IMF's Asia Pacific director told Dow Jones Newswires in
Washington on Thursday that he was encouraged by the rupiah's
recent appreciation, but he attributed the rise partly to the
Japanese yen's rise against the dollar.

Like the rupiah, stock prices on the Jakarta Stock Exchange
(JSX) fell 1.7 percent on continued profit taking after strong
gains recently.

The JSX Composite Index closed 5.52 points down at 316.79 on a
total turnover of 204.88 million shares valued at Rp 172.53
billion.

Losers beat gainers by 47 to 37 with 92 stocks ending the day
unchanged.

The head of research at BNI Securities, Adrian Rusmana, said a
weaker rupiah coupled with lingering uncertainties in the
domestic political environment had killed market sentiment.

"I think profit taking and lingering worries over the
country's political situation capped investors' buying
sentiment," he said. (aly)