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)