Rupiah gains ground on debt, banking reforms

JAKARTA (JP): The rupiah strengthened to 11,000 to the U.S. dollar yesterday on banking reforms, new measures to resolve corporate debt and market intervention by Bank Indonesia.

The strengthening rupiah also boosted stock prices on the Jakarta Stock Exchange (JSX), which saw its main price index climb 0.6 percent to close at 476.31 points.

Currency dealers said the rupiah, which opened at 13,500/14,500 in the morning, ended firmer at 10,900/11,300 in Jakarta yesterday after it hovered near 14,000 in midday trading.

The rupiah opened at 11,000/11,400 in London yesterday.

Besides reforms, dealers said, the strengthening rupiah was also supported by Bank Indonesia's intervention in a very quiet market due to the absence of Singapore and Hong Kong players celebrating Chinese New Year and Moslem Idul Fitri holidays.

"The rupiah was especially propped up by the central bank's intervention in the practically restrained market. The real test for the rupiah will be next week when Singapore operators are back in the market again," a local bank chief dealer said.

Dealers said the central bank stepped in the market repeatedly when the rupiah was between 13,500 and 11,200 to shore it up.

They said the strengthening rupiah was also supported by the massive banking reforms and rises in the central bank's benchmark rates on its certificates of all maturities.

The government announced massive banking reforms yesterday to restore confidence in the system, guaranteeing the embattled banking sector's deposits and debts and allowing foreign ownership in local banks.

"I think the market has long anticipated the government's massive economic reforms to improve the country's ailing economy," the head of research at Sigma Batara, Fadjar Limin Sutandi, said.

Bank Indonesia followed up the reforms by raising the one-day Bank Indonesia certificate (SBI) rate from 14 percent to 30 percent, the two- to six-day rate from 15 percent to 26 percent and the seven-day rate from 16 percent to 25 percent.

Other rate increases include the one-month, up from 20 percent to 22 percent, and the three-month from 18 percent to 19 percent.

Coinciding with the banking reforms, the government-appointed team to tackle corporate debt said it would seek a voluntary, temporary freeze on the servicing of the interest and principal of corporate debt.

Elsewhere, the Malaysian ringgit and Singapore dollar gained ground as Indonesia's announcement prompted players to unload some of their long dollar positions.

"In the event of a moratorium, there'll be no need for dollar buying against Asian currencies. So it's a speculative move, those guys who are long are just throwing back (their dollars)," a U.S. bank dealer in Singapore told Reuters.

The Malaysian ringgit shot to a high of 4.33 per dollar on stop-loss dollar sales triggered by long liquidations in a very thin market. It was at 4.4350/447 at 0900 GMT from 4.5300/600 late on Monday.

The Singapore dollar rose to 1.7320/70 against 1.7535/65 earlier.

The Thai baht shed some of its gains, driven by exporter dollar sales, to stand at 54.60/80 per dollar onshore against 54.70/90 late on Monday.

Dealers said trading was subdued due to holidays elsewhere in the region, although Thai markets are not closed for the Lunar New Year.

Prime Minister Chuan Leekpai said he saw no impact on Thailand from Indonesia's move to freeze its debt servicing.

Deputy Finance Minister Pisit Leeatham said Thailand had no plans to scrap its two-tier baht market for the moment due to the uncertain currency outlook in the region.

The Philippine peso ended firmer at 42.43 per dollar against Monday's 43.08 close after a choppy session which saw the market see-sawing between the impact of the central bank's rate hike and spillover concerns from Indonesia.

The central bank raised its overnight borrowing rate -- a benchmark for interbank call loan trading -- to 14 percent from 12 percent.

The Hong Kong dollar ended slightly higher at HK$7.7400/20 to the U.S. dollar from Monday's 7.7438/58 close.

The Indian rupee firmed to 38.450/480 to the dollar against a previous 38.70/73 close on exporter dollar sales after a long weekend. Dealers said the central bank intervened through swap deals to check a rise in forward dollar premiums.

Markets in Taiwan and South Korea were closed for the Lunar New Year. (aly)