Rupiah falls slightly lower as stocks surge 1 percent

JAKARTA (JP): The rupiah fell against the U.S. dollar on Thursday, closing weaker at 8,700 in thin trading while stock prices edged up 1 percent.

Currency dealers said that the rupiah, which managed to advance against the greenback the previous day, fell slightly because market participants found no new reasons to enter the currency market.

"The rupiah barely moved as market operators stayed clear of the market," a chief dealer with a joint venture bank said.

Currency dealers said that the rupiah, which opened at 8,575/8,625, traded narrowly between 8,600 and 8,700 on Thursday. The rupiah finally closed at 8,700, slightly lower than its 8,650 close the previous day.

Dealers said that limited dollar offerings by state banks kept the rupiah below the 9,000 level against the American dollar on Thursday.

Currency dealers also said that the market shrugged off the news that the government would close down more banks by the end of this month as part of the country's efforts to reform its banking system.

President B.J. Habibie said on Thursday that the government would close banks which did not qualify for the bank recapitalization program on Feb. 27.

"The news failed to dampen the sentiment on the rupiah," a dealer said.

Currency dealers said that the rupiah was expected to be traded between 8,500 and 9,000 on Friday as operators would remain on the sidelines.

Unlike the rupiah, share prices on the local stock market rose 1 percent on Thursday, with the Jakarta Stock Exchange (JSX) main price index closing 3.97 points higher at 402.64 on a total turnover of 167.33 million shares valued at Rp 218.56 billion.

Decliners led advancers 39 to 36 with 89 stocks unchanged.

Stockbrokers attributed the slight increase in the market to the buying of blue-chip stocks PT Telkom and PT HM Sampoerna, as well as bullishness in regional markets.

Shares of PT Telkom rose Rp 225 to Rp 2,950, with 22.32 million shares changing hands. Shares of HM Sampoerna rose by Rp 400 to Rp 6,075, with a turnover of 1.59 million shares.

However, stockbrokers said that profit taking on some blue chips which had rallied recently weakened the buying sentiment as most investors discarded their portfolio holdings.

Vonny Juwono, an institutional sales broker with Trimegah Securindolestari, said several foreign brokerage firms, including ING Barings and Credit Lyonnais, remained on the selling side on Thursday, cashing in their profits on blue-chip stocks which had rallied in previous days.

Brokers said that a lack of fresh market leads coupled with lingering worries over escalating social unrest ahead of the June 7 general election kept most offshore investors from entering the hammered local market.

The head of sales at Bahana Securities, Andre Cita, said, "A lack of fresh leads in the domestic market forced our stock market to follow the direction of regional markets."

The head of research at BNI Securities, Adrian Rusmana, said that fears of escalating unrest ahead of the elections later this year prevented foreign investors from remaining in the local market.

"Also, the government has indicated it will raise interest rates to defend the beleaguered rupiah," he said.

The government raised Bank Indonesia's one month promissory notes to 37.69 percent this week, up from 36.97 percent the previous week.

Adrian said that higher interest rates would kill the sentiment in the local equity market for the rest of this year because most investors would prefer to put their funds in time deposits offering higher yields. (aly)