Rupiah falls to near 17,000 against dollar

Rupiah falls to near 17,000 against dollar

JAKARTA (JP): The rupiah continued its free fall yesterday,
almost touching its historic low of 17,000 against the U.S.
dollar, because of rising dollar demand and persistent worries
about political unrest.

The stock market capitalized on the rupiah's plunge, closing
almost 5 percent higher on arbitrage trading in several dual-
listed stocks.

Currency dealers said trading was very thin in the rupiah,
which opened at 15,500/15,700 to the greenback and ended the
trading day at 16,700.

Yesterday's closing value was 9 percent lower than the
previous day's close at 15,100.

Dealers said the relative recovery of the regional market,
with the Japanese yen recovering to 137 against the American
dollar, did not help the rupiah recover against the dollar.

"It is just confusing. The rupiah's stance today (yesterday)
did not go in line with the regional market," a chief dealer with
a local private foreign exchange bank said.

The rupiah hit a historic low of 17,000 on January 22.

Dealers said a combination of genuine dollar demand by
domestic commercial banks and investors and persistent worries
about further political unrest in the coming days kept the rupiah
in the doldrums yesterday.

They said local commercial banks which had yet to settle their
foreign obligations would continue to purchase dollars in the
coming days after Bank Indonesia extended the deadline for them
to resolve their foreign exchange debts and trade finance arrears
to June 30 from June 12.

"Some local investors are really worried the rupiah will
tumble further to the 20,000 level before they settle their
debts," another dealer with a local private bank said.

"It is a kind of self-fulfilling prophecy as local banks and
investors have to buy dollars now before it rises further," he
added.

Businesspeople and economists have expressed concern over the
free-fall of the rupiah against the dollar as it will force most
business activities to grind to a halt.

"If the rupiah continues to remain weak against the dollar, no
single company will be able to survive," Peter F. Gontha, vice
president and chief executive officer of petrochemical firm PT
Chandra Asri, said.

Economist Hartoyo Wignjowiyoto said the country's unsettled
political situation, with more and more protests in several major
cities over the past few days, as the main culprit behind the
rupiah's sharp drop.

"It think it is the country's absurd political situation with
leaders competing against each other which is dragging the rupiah
down," he said.

He warned that the rupiah could hit another historic low of
20,000 to the American greenback in the coming days and 25,000 in
the next three months if the government did not take action to
improve the economic and political climate.

He suggested that the government take care of the financial
and real (nonfinancial) sectors to stimulate economic activity
and stop inflation from soaring further.

The rupiah's sharp drop encouraged investors to buy dollar-
valued stocks, like telecommunications firms PT Telkom and PT
Indosat and tin miner PT Tambang Timah, to take advantage of the
rupiah's fall, stockbrokers said.

The Jakarta Stock Exchange Composite Index rose 19.93 points
to 419.44 on a total turnover of around 251 million shares
changing hands on the regular market worth Rp 370 billion
(US$24.66 million).

Heavyweights Telkom and Indosat, which together account for
about 30 percent of market capitalization, were the major index
movers.

Telkom gained Rp 450 to close at Rp 4,075 on 17.82 million
shares traded, Indosat jumped Rp 1,125 to close at Rp 16,025 on
1.59 shares and Tambang Timah rose Rp 200 to end at Rp 6,675 on
73,500 shares.

A broker with Bali Securities said that even though the
benchmark price rose, market sentiment in the local bourse
remained bearish due to the country's bleak macroeconomic outlook
with escalating inflation and a contraction of gross domestic
product.

"If you take Telkom and Indosat out of the market, you will
see the real picture of our market. It is so gloomy," he said.
(das/aly)