Rupiah plunges to 8,610, stocks fall 4.5%

JAKARTA (JP): As the situation in East Timor continued to worsen, the rupiah took its third dive of the week on Wednesday, falling to 8,610 against the United States dollar from 8,285 the previous day.

Meanwhile, share prices on the Jakarta Stock Exchange (JSX) tumbled 4.5 percent, with the composite index falling 24.73 points to close at 520.62.

Currency dealers said the bearish sentiment on the rupiah followed the pattern of the previous two days.

They said the rupiah could fall as low as 9,000 to the dollar on Thursday, but dismissed possibilities the greenback would revisit its historical high of Rp 17,000, even in the long term.

"The market reacted so negatively following the (Wednesday) afternoon announcement that the government had rejected an international peacekeeping force to maintain security in the troubled East Timor," a dealer with a private bank said.

Mounting international pressure on Indonesia over its handling of the East Timor situation has had a negative impact on the rupiah.

The central bank was seen selling the dollar at lower market rates to arrest a further slip in the local currency, he said, adding that the intervention managed to prop up the rupiah between 8,450 and 8,350 in the morning session.

"But the dollar demand got too strong, prompting a further fall in the rupiah's value in the afternoon session," he said.

At the end of trading, the rupiah plunged to 8,610 against the greenback, its lowest level since the end of April.

Share prices on the JSX mirrored the rupiah's tumble, falling 4.5 percent on Wednesday.

Trading volume was 343.8 million shares worth Rp 527.6 billion.

A senior analyst from PT Jardine Fleming Nusantara, Rizal Prasetyo, said the East Timor issue -- worsened by excessive media coverage -- was the source of the local market's negative sentiment on Wednesday.

"Foreign investors were the most active sellers, particularly in the afternoon session," he said.

He said investors from Europe and the United States were more reactive than their Asian counterparts in responding to the East Timor issue.

"Asian investors generally think that East Timor is not too big of an issue and that the province does not have a significant economic value to the country. This is probably why they are more easy on the East Timor issue," he said.

Rizal said that apart from the country's political crisis, shares on the JSX were a very good buy. (udi)