Rupiah falls to 8,285 against U.S. dollar

JAKARTA (JP): The rupiah continued its decline against the U.S. dollar on Tuesday, sliding to 8,285 at the end of the trading -- from 8,105 the previous day -- as fear intensified over the East Timor issue.

However, share prices in the local stock market advanced 0.9 percent on the buying of telecommunications and cigarettes shares which bucked the bearish trend of most others, analysts said.

Currency and securities analysts said that the East Timor issue was still the main influencing factor behind the bearish financial market, further adding to negative sentiments resulting from the Bank Bali scandal and other social turmoil in several parts of the country.

Adrian Rusmana from PT BNI Securities acknowledged the main factor behind the rupiah's sharp fall was investors' fear that Indonesia's poor handling of the bloody conflicts in the riot- torn province could lead to a suspension of the IMF bailout fund.

"But it is not the only reason. Concerns that the interest rate will further decline also caused the rupiah's fall," he added.

Indonesia's consumer price index, which measures inflation, declined for a sixth consecutive month in August by 0.93 percent from its level in July.

Theoretically, negative inflation would prompt the central bank to reduce its interest rates.

He said a further drop in the deposit rate from the average 14 percent at present would certainly make an investment in dollars much more attractive.

"This is certainly bad news for the Indonesian currency," he added.

The government, through state Bank Mandiri, was seen intervening the market to sell dollars below Rp 8,200 in an attempt to arrest the greenback's rise, another analyst said.

Unlike the rupiah, share prices on the Jakarta Stock Exchange (JSX) rose 0.9 percent on Tuesday, with the benchmark price gauge rising 4.92 points to 545.35 points.

JSX trading volume on Tuesday was just 228 million shares worth Rp 470 billion.

Stock brokers said that fears the rupiah would weaken further amid the turmoil in East Timor weighed down market sentiment.

But in late trading, he said, telecommunications and cigarette shares were active, which then brought up the index.

"Telkom, the state-owned telecommunications company, and cigarette shares were seen active amid the other shares that moved so slowly," he said.

Some stock brokers said the government might have intervened the market by buying blue chips, especially those of state-owned Telkom and Indosat, to boost the price index.

Shares of PT Telkom closed up 2.8 percent or Rp 75 to Rp 2,725. State-owned international telecommunications operator Indosat was up 1.5 percent or Rp 175 at Rp 12,000. (udi)