Rupiah firm despite political instability

JAKARTA (JP): The rupiah managed to stay in touch with the 7,000 level against the U.S. dollar on Wednesday, despite the country's political uncertainty.

Analysts said the rupiah closed slightly lower at 7,500 against the U.S. dollar, with the overall trading outlook remaining stable.

News of a cut in the U.S. Federal Reserve's interest rate helped the rupiah strengthen to its intraday high of 7,250, but profit taking in the afternoon reversed the morning's gains, analysts said.

"The fate of the rupiah was determined by regional factors, and especially the U.S. interest rate cut," a chief dealer with a local private bank said.

Dealers said the U.S. interest rate cut prompted some market participants to sell dollar holdings either in profit taking or to cut losses made early on Wednesday.

"Some market participants who bought rupiah at 7,100 later sold for a profit, while others decided to cut their losses," the dealer said.

The rupiah, which plunged to 17,000 against the dollar following May's bloody rioting, has been stronger and more stable in recent weeks, staying at between Rp 7,000 and Rp 8,000 for at least four weeks despite rising tension that culminated in clashes between security forces and anti-government protesters at the end of last week.

Dealers said that news of a fresh student demonstration in Jakarta in the afternoon also contributed to the change in direction witnessed in late trading on Wednesday.

"Demonstrations triggered some short covering in late trading on Wednesday," another dealer said.

Around 3,000 student protesters took to the main streets of Jakarta in the late afternoon to mourn those killed in clashes with security personnel at the Semanggi cloverleaf junction last Friday.

Share prices on the Jakarta Stock Exchange (JSX) edged higher on Wednesday, with the main price index rising 3.9 percent (13.76 points) to 369.99 on a total turnover of 490.53 million shares valued at Rp 389.03 billion (US$51.87 million).

Gainers led losers by 90 to 14, with stocks in 74 companies remaining unchanged.

Stock analysts said on Wednesday that bullish sentiment around the region coupled with the interest rate cut by the U.S. Federal Reserve had revived trading activities on the local bourse.

"Although we have not seen any positive leads at home, the U.S. interest rate cut lifted local market sentiment," the head of research at BNI Securities, Adrian Rusmana said. (aly)