Rupiah hovers around Rp 10,000 threshold
Rupiah hovers around Rp 10,000 threshold
Urip Hudiono, The Jakarta Post/Jakarta
The rupiah continued its fall against the U.S. dollar on Friday,
as continued corporate demand for imports and high oil prices
dragged the rupiah closer to the Rp 10,000 mark.
The rupiah did break the 10,000 barrier during intraday
trading, before closing at Rp 9,985 to the dollar on suspected
market intervention by the central bank.
That was down 0.3 percent from Thursday's Rp 9,950 closing --
the currency's weakest level since March 2002. It was also 1.8
percent weaker than last week's Rp 9,805 level.
Over the course of the year, the rupiah has lost about 7
percent against the greenback.
And that trend does not appear likely to change anytime soon,
with the government appearing unable to strengthen the currency.
Bank Indonesia, market analysts are saying, might also refrain
from using the country's forex reserve, which has dwindled to
US$32 billion from $36 billion earlier this year, for an all-out
defense of the rupiah.
Coordinating Minister for the Economy Aburizal Bakrie said the
central bank's intervention in the local forex market would only
be "temporarily effective" in curbing the rupiah's fall.
Aburizal said the country's need to spend huge amounts of
dollars to import oil for its subsidized fuel program was the
main cause of the pressure on the rupiah.
"The problem is that our dollar demand continues to exceed
supply. If we continue subsidizing fuel, we will have to continue
buying dollars, which only makes the dollar stronger.
"The rising budget deficit due to soaring fuel subsidies amid
recently high oil prices has also eroded the market's confidence
in the rupiah," he said.
Aburizal said it was urgent to reduce the fuel subsidy by
making it a targeted subsidy focused solely on the poor.
"That way, the subsidy would also be in rupiah," he said.
Plans for such a scheme are underway, pending a comprehensive
registration of the country's poor. After the registration is
complete, the government can reduce the fuel subsidy through
another fuel price hike, which Vice President Jusuf Kalla has
signaled could occur before January next year.
Raising fuel prices, however, is a politically sensitive
issue, with the last hike in March sparking nationwide protests.
As a result the government has only moved halfway in lifting
the fuel subsidy, requiring industrial users to pay full market
prices since last month.
Aburizal also questioned the market and the public's
perception of the rupiah having a psychological level of Rp
10,000, asking why this so-called psychological level was not at
Rp 7,000 or even Rp 15,000.
Meanwhile, Bank Indonesia deputy governor Aslim Tadjuddin said
the central bank remained on guard to continue defending the
rupiah through market interventions.