Rupiah hits 11,500 against dollar as politics heat up
Rupiah hits 11,500 against dollar as politics heat up
JAKARTA (JP): The rupiah plunged on Monday to an intraday low
of 11,500 against the U.S. dollar amid growing political concerns
as thousands of students took to the streets to demand President
Abdurrahman Wahid resign.
But the rupiah recovered somewhat to end the day at 10,500
against the dollar, as Bank Indonesia intervened in the money
market and the government decided to delay an increase in fuel
prices until October.
The Jakarta Stock Exchange (JSX) composite index took a
beating from the rupiah's plunge, closing at 396.61 from 414.11,
its lowest level in two years.
Bank Indonesia Governor Sjahril Sabirin said the central bank
would continue to intervene in the foreign exchange market.
"We are ready to do whatever it takes, be it through
intervention or interest rates hike," Sjahril said.
The rupiah opened trade on Monday amid increasing political
worries, as some 10,000 students gathered in front of the
presidential palace to demand Abdurrahman resign.
Although the rally was peaceful, it recalled former president
Soeharto's fall in the face of massive student protests.
But Abdurrahman's announcement that the fuel price hike,
slated for April 1, would be delayed helped defuse the situation
and allowed the rupiah to rebound.
Further intervention by Bank Indonesia pushed the rupiah up to
10,500 against the dollar from its opening of 10,090.
Sjahril said Bank Indonesia might consider increasing the
amount of money it spent intervening in the foreign exchange
market, despite the country's thin foreign exchange reserves.
He said further intervention would not hurt the country's
foreign exchange reserves, which stood at US$29 billion gross, or
$18 billion net.
But he admitted it would be difficult to bring the rupiah back
up to 7,000 against the dollar. "If we can bring it to below the
10,000 level than that is already positive," he said.
Bank Indonesia deputy governor Miranda Goeltom confirmed the
central bank had intervened in the money market on Monday to lift
the rupiah from the 11,000 level.
"We intervened a lot today," she said, but refused to state
the amount of U.S. dollars the central bank sold in defending the
rupiah.
She added that Bank Indonesia also raised its overnight
interest rate by 50 basis points to 12.125 percent.
The move is expected to make the rupiah kept at the central
bank more attractive and discourage the purchase of U.S. dollars.
Sjahril and Miranda's vow to continue defending the rupiah
contradicted earlier comments by Bank Indonesia senior deputy
Anwar Nasution, who said intervention was futile.
According to Anwar, Bank Indonesia's position was too weak to
intervene because of its thin foreign exchange reserves.
He added that intervention could not offset the noneconomic
factors dragging the rupiah down.
"At present, intervention by Bank Indonesia would be like
pouring water on sand," he said.
Instead, he urged a political reconciliation to allow
Indonesia's economy to resume its path to recovery.
Separately, House of Representatives Speaker Akbar Tandjung
said a "political solution" might be needed to prevent the
currency from sliding further.
"If Bank Indonesia says it is futile to intervene because the
causes (dragging down the rupiah) are noneconomic, we can
understand that," Akbar said in response to Anwar's comments.
Akbar said within the next few days he would summon Bank
Indonesia and government officials to discuss the rupiah. (bkm)