Rupiah flirts with 11,000 mark amid pessimism in RI economy

The rupiah plunged early on Tuesday to beyond 11,000 per U.S. dollar, reaching the lowest level in three months, but managed to strengthen late in the afternoon amid rumors of Bank Indonesia intervention and profit taking.

The local currency ended higher at 10,835 compared to 10,940 on Monday.

Dealers said that corporate dollar demand and a slew of bad news for the economy had caused the rupiah to be under strong pressure.

Dealers said that the central bank was believed to have sold around US$20 million to avoid further depreciation in the local unit.

But the country's bleak economic outlook would continue to cloud the rupiah, dealers said.

The World Bank criticized the government on Monday for the lack of progress in implementing key economic reform programs particularly in the field of privatization and asset sales.

The snags in the planned sale of state-owned cement producer PT Semen Gresik to Mexican cement giant Cemex SA de CV had also created concerns among foreign investors.

Late last week international rating agency Standard & Poor's cut the country's sovereign credit rating from CCC+ to CCC with a negative outlook.

The rupiah has been weakening since the middle of August amid growing pessimism toward the administration of President Megawati Soekarnoputri particularly in the implementation of economic reform programs.

The rupiah strengthened to around 8,200 when Megawati assumed power late in July from around 11,000 during the administration of former president Abdurrahman Wahid. --JP