Rupiah hits new low, shares down

JAKARTA (JP): The rupiah fell to an historic low against the U.S. dollar yesterday while share prices lost 1.6 percent, dealers and brokers said.

Currency dealers said the rupiah fell to a new low of 3,125 to the greenback at midday from an opening of 3,035 before settling at 3,100/22 at close.

It was the lowest level since the rupiah was floated on Aug. 14. The previous low was 3,070 on Aug. 29.

Currency dealers said the rupiah's fall was triggered by several factors, ranging from usual weekend short-covering in dollars to corporate hedging and fears about possible downgrading in the country's credit rating outlook.

One state bank treasury head said rating agency Standard and Poor's had informed several local banks it would cut Indonesia's currency outlook to negative.

It downgraded Malaysia's and the Philippines' currency outlook to negative on Thursday and yesterday respectively.

But he said the fall in the rupiah yesterday was exaggerated by thin volume and engineered by foreign players as the market had discounted the possible currency rating cut.

"The market is still very quiet. I think it's not genuine demand for dollar although local appetite for dollar remains strong. I think it's much more the work of Singapore players," the treasury head said.

He said many local players were now inactive because it was so risky and costly to take any new position on either long or short dollar.

Local demand was purely driven by corporate companies and financial institutions to cover their dollar obligations as they feared their debts would not be rolled-over due to lingering uncertainty.

"Foreign players can dictate the value of dollar against the rupiah as they know that a lot of firms could not fund their commercial papers," he said.

Thereby, foreign players will continue to determine the value of the rupiah in the near- and medium-term as the market expected no resistance from local players.

"In this situation, foreign players will continue to prosper, while locals will continue to bear the losses and not be able to recover them," he said.

Local players were in a dilemma because they could not easily unload their rupiah and keep dollar as they would lose because they had to pay high interest rates while holding dollar.

They could also not unload their dollar to get the expensive rupiah, particularly if they had obligations in dollar denomination.

"So even if liquidity is easing, as long as the rates remain high, it will continue to burden local banks," he said.

He added the central bank would not easily lower rates while the rupiah remained under attack.

"It's a dilemma for everyone here," he said.

The rupiah's low coincided with the end of five days of gains on the Jakarta Stock Exchange, which saw the composite index falling 9.300 to close at 549.920 points yesterday.

Stockbrokers attributed the downturn to profit-taking on the recent gains as the market had been dominated by retail investors.

Managing director of sales at Lippo Securities Harry Danardjojo said that despite the current sluggish market, there were still quality stocks to buy.

He said companies in the hands of good management and not highly exposed to foreign exchange loss would provide some gains. (aly/rid)

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