Rupiah hits new low, shares down

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)

Currencies -- Page 11