Rupiah falls to three-month low
Rupiah falls to three-month low
Dadan Wijaksana
The Jakarta Post
Jakarta
The rupiah fell to its lowest level in three months on Wednesday
to close at Rp 8,610 per U.S. dollar from 8,425 in Tuesday's
closing, as foreign investors continued buying dollars after
selling rupiah-denominated assets.
The continued heavy selling of the rupiah assets -- mainly in
the form of bonds -- was triggered by rising confidence in the
U.S. economy, StanChart economist Fauzi Ichsan said.
The local unit fell, at one point, to as low as 8,655 earlier
in the day, although intervention from Bank Indonesia, as
confirmed by governor Burhanuddin Abdullah, managed to halt any
further decline. Burhanuddin said the central bank would continue
to buy rupiah with its for currency reserves from time to time to
reduce the volatility.
"It (rupiah's sell-off) started last week after (U.S. Federal
Reserve Chairman Alan) Greenspan's remarks. A number of investors
in New York, betting on rising confidence in the dollar, bought
the greenback using the proceeds from selling their assets,
mostly (bank) recapitalization bonds.
"This, coupled with the negative sentiment arising from the
upcoming Annual Session of the MPR (People's Consultative
Assembly), brought down the rupiah to the current level," Fauzi
told The Jakarta Post.
Last week Greenspan painted a bright outlook for the U.S.
economy, giving fresh blood to the depleted dollar.
The rupiah has been depreciating ever since. The local unit
had previously been rising rapidly against the dollar, gaining by
around 8 percent since the start of the year.
Asked whether the rupiah would fall further, Fauzi claimed he
was upbeat that it would not be the case, saying the trend was
only temporary, as the country's macroeconomic fundamentals
remained sound.
He cited the interest margin of the rupiah against the dollar
and continuing capital inflows, wherein investors were buying
local assets for sale by the Indonesian Bank Restructuring Agency
(IBRA) as reasons to believe it was just a temporary blip.
Currently, the one-month interest margin between the rupiah
and the dollar stands at around 8 percent.
Capital inflows would also come via the government
privatization program. To name a few, the government plans to
sell its shares in Bank Rakyat Indonesia (BRI), Bank Lippo and
Bank Danamon.
"That should be enough to support the rupiah in the medium
term," Fauzi said, adding that the local currency would now seek
to find a new equilibrium level at a range of between 8,400 to
8,800 per dollar.
The central bank also shared the same confidence on the
rupiah, by maintaining its trend of cutting down its one-month
interest rate to 9.17 percent at its weekly auction.
The previous level stood at 9.21 percent.
Meanwhile, the rupiah's fall triggered investors to sell
stock, dealers said, with the Jakarta Composite Index closing 0.8
percent lower.
The index ended at 512.62 points, versus 516.77 the day
before.
New strength -- Page 14