Rupiah falls to another new low as shares gain footing
JAKARTA (JP): The rupiah fell yesterday to another new low against the U.S. dollar but local stock prices gained footing on the increase in prices of blue chip shares.
The rupiah sank to a new historic low of 3,290 against the dollar in morning trade before recovering to close at 3,269 against the opening of 3,210, foreign exchange dealers said.
Local dealers said the rupiah's fall was triggered by the increase in demand for the American greenback.
"Local companies are seeking the dollar to repay their foreign short-term debts. Others buy the dollar to cover their unhedged positions," one dealer said.
A sharp fall in regional currencies, such as the Malaysian ringgit, also partly contributed to a further fall in the rupiah.
"I think what's happened in the last few days was that there was a high demand for dollar by some corporate companies to cover their foreign exchange exposures," Christopher Nailer, Economists Intelligence Unit's regional economist said on the sidelines of a seminar organized by The Castle Group yesterday.
Francis Y. Shea, an advisor to Bank Danamon agreed, saying the weakening rupiah in the last few days was caused by the increasing demand for U.S. dollar by some Indonesian corporations to refinance their short-term dollar debts.
"Foreign fund managers in Singapore and Hong Kong know this situation pretty well and this pushed down the rupiah to a new historic low," he said.
"That's what happened with rupiah over the past few days," he said.
A local chief dealer said that many local companies entered the market and bought a significant amount of dollars from operators based in Singapore and Hong Kong.
"But the total volume was considerably thin with a value of no more than four and five million dollars," the dealer said.
A dealer at Bank Bira said yesterday that rupiah was relatively stable in the afternoon due to market talk that the central bank checked market prices, encouraging further dollar buying.
"The central bank checked rupiah-dollar trading activities yesterday but made no immediate intervention," the dealer said.
He said high corporate dollar demand was reflected by expensive overnight dollar rates which rose to a high of 25 percent yesterday.
The rupiah's fall yesterday, however, did not affect stock market share prices.
The Jakarta Stock Exchange (JSX) composite index ended slightly higher up 0.45 points to 546.68 yesterday, with 234.94 million shares changing hands on the regular market valued at Rp 360.07 billion (US$120.02 million).
Securities dealers said the slight increase in the price gauge was mainly due to an increase in several big capitalized stocks.
"People are still cautious with continuing uncertainties in the currency market," Pentasena Securities' head of research Mohammad Syharial said yesterday.
He said most investors were in a "wait and see" mode to watch the direction of the rupiah in the long-term.
Even monetary officials have no idea at what level the plunging rupiah will bottom out.
Minister/State Secretary Moerdiono said Monday that nobody knew when the rupiah would settle.
Moerdiono, a member of a monetary team dealing with the currency crisis, said the government would continue to take efforts to stabilize the rupiah.
"The direction of the rupiah is still the dominant factor in trading activities in the stock market," one analyst said.
Most blue chip stocks gained yesterday with telecommunications company PT Telkom rising Rp 25 to Rp 3,625, international telecommunications company Indosat gaining by Rp 225 to Rp 8,325 and tin mining company Tambang Timah rising Rp 200 to Rp 4,825. Cigarette maker Gudang Garam gained Rp 200 to Rp 9,500 while its competitor HM Sampoerna was unchanged at Rp 6,750. (aly)
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