Rupiah firm against dollar as stocks lose ground

JAKARTA (JP): The Indonesian rupiah was firm against the U.S. dollar again, closing at 3,575/3,600 yesterday after it weakened to 3,640 in midday trading before Bank Indonesia stepped in to intervene.

But stock prices on the Jakarta Stock Exchange (JSX) lost ground on poor market sentiment, currency dealers and stock brokers said.

Foreign exchange dealers attributed the strengthening rupiah to Bank Indonesia's intervention in the spot market and the wait -and-see attitude by most investors for the announcement of the financial aid package by the International Monetary Fund (IMF).

"Bank Indonesia was seen in the market three times with a very limited amount of dollars," a local bank chief dealer said.

The dealer said Bank Indonesia was seen in the market almost every day during the week.

He said the market got an ample rupiah supply and saw a decline in the overnight dollar rate to as low as 5 percent from the previous 15 percent.

"With the lower overnight dollar rate, dollar liquidity is relatively good," another dealer said.

Currency dealers said that even though the rupiah firmed against the dollar, overall trading activity was little as most investors were waiting for the widely-discussed financial package from the IMF to restore Indonesia's economic stability.

"I think the announcement of the financial package and its conditions will determine the trading sentiment next week," one dealer said.

"Overall trading turnover is relatively thin," he said.

Government officials in Jakarta said talks with the IMF-led team continued yesterday and the announcement of the financial package was expected later next week.

Analysts speculated that the financial package would boost market confidence in the face of the currency crisis.

But one analyst cautioned that the effect of the package would be felt in the long term, not in the short term.

The rupiah has lost almost 35 percent of its value against the dollar since early July.

As the rupiah gained ground yesterday, share prices on the JSX fell despite a technical rebound in other regional markets.

The JSX composite index was 0.76 percent or 3.74 points lower to close at 490.39 yesterday with a total turnover of 248 million shares in the regular market valued at Rp 210 billion (US$60 million).

"I think trading activities are very quiet," Harita Securities director Christina Lim said.

A director of Asian Development Securities, Naotake Ikeda, said many investors did not have any fresh incentive to reenter the market given the volatile currency.

"Most investors still have a very negative sentiment about the market," he said, adding that the current bearish mood would continue for the next few months.

Ikeda said the technical recovery in regional markets did not seem to send a positive sentiment to stock-trading activities in the Jakarta stock market.

"For the Jakarta stock market, the main issue now is on the IMF-led financial package," he said. (aly)