Rupiah hits another low but recovers
Rupiah hits another low but recovers
JAKARTA (JP): Despite Indonesia's strong economic
fundamentals, speculators made more concerted attacks on the
rupiah yesterday, pushing it to a record low and prompting the
central bank to intervene to defend the currency.
Dealers said spot rupiah against the U.S. dollar dipped to a
historic low of 2,650/55 yesterday morning from a 2,510/20 open
before easing to 2,636/41 at 6:00 p.m. local time.
Following the plunge in rupiah, Jakarta share prices closed
1.6 percent lower yesterday on a broad based sell-off. The
Jakarta Stock Exchange composite index fell 11.59 points to
712.40.
Bank Indonesia's Governor Soedradjad Djiwandono called on the
people yesterday not to panic about the steep fall in the
rupiah's exchange rate and not to join the rush to the American
dollar.
"The people's purchasing power is not measured by the rupiah
appreciation but by the inflation rate," Soedradjad told newsmen
yesterday after attending the meeting of the Bankers Club
Indonesia.
Dealers said the rupiah became the target of speculators
yesterday after being spared previously when they focused on
other regional currencies.
"They are trying to force the central bank to float the rupiah
or at least widen the intervention band because they have been
long on dollar and short on rupiah," a dealer with a local
foreign exchange bank said.
"If they could force the Thai baht and the Philippines peso to
devalue by more than 15 percent, why not the rupiah?" he asked.
Bank Indonesia on July 11 widened the dollar-rupiah
intervention band, in which the rupiah can float before the
central bank intervenes, to 12 percent from 8 percent, to avert
speculative attacks.
Speculative attacks on the rupiah escalated early last week
following the de facto devaluation of the Thai baht earlier this
month and the Philippine peso on July 11.
A dealer of another foreign exchange bank predicted that the
attacks on the rupiah would continue until Bank Indonesia, the
central bank, or the speculators controlled the situation and
made profits.
He said Bank Indonesia yesterday intervened in the market with
some US$500 million through four or five brokers.
The central bank's intervention at midday stopped the rupiah
from further dipping in afternoon trading.
An executive at publicly listed Bank Bira, Parveen Gandhi,
predicted that speculative attacks on the rupiah would ease by
next week and the rupiah would recover to below the 2,600 level.
"When I attended the Asian Debt Conference in Hong Kong last
week, everyone I met there said the rupiah would survive the
attacks as Indonesia's economy was in better shape compared to
those of Thailand and the Philippines," Gandhi said.
President of the Manila-based Asian Development Bank Mitsuo
Sato agreed and said that Indonesia should be eventually free
from such speculative attacks considering its sound macroeconomic
fundamentals.
"Of course, you are not entirely free from such attacks, but
you are much better situated compared to other countries which
had to devalue their currencies, including Thailand and the
Philippines," Sato told journalists here yesterday.
"You are prudent enough to make exchange rate movement more
flexible. That's very effective in coping with this question of
currency attacks," added Sato who is here for a few days of
visit.
Indonesia has less problems in its banking sector compared to
other countries, he said.
Yesterday Sato met with Minister of Finance Mar'ie Muhammad,
Bank Indonesia Governor J. Soedradjad Djiwandono and Coordinating
Minister for Economy and Finance Saleh Afiff. He is scheduled to
meet President Soeharto today.
Chairman of the Indonesian Issuers Association Rosano Barack
called on local stock market players not to panic in reading the
current development.
"They (speculators) are just bluffing. If we panic and buy
dollars, then they will win... Let them buy dollars, but don't
follow by buying dollars. Sooner or later they will get lost,"
Rosano said.
Speculators attacked the rupiah after they failed to attack
the Indonesian stock market, Rosano said.
He said yesterday's drop in Jakarta stock market was caused
mainly by the panic selling by retail investors who had little
information on speculative attacks on the rupiah.
"That's only temporary, it will soon recover," Rosano said.
An analyst at Schroders Indonesia Securities John Rachmat
agreed, saying the stock market was overreactive to the rupiah's
plunging value.
He said foreign investors dumped stocks of companies which had
large dollar-denominated debts. (alo/rid)
Editorial -- Page 4
Photo -- Page 10
Growth -- Page 11
Soedradjad -- Page 12