Rupiah propped up before MPR session

Rupiah propped up before MPR session

JAKARTA (JP): Bank Indonesia said on Wednesday it would
intervene in the currency market in the days leading to and
during the special session of the People's Consultative Assembly
next week to prevent the rupiah from declining further.

BI Governor Sjahril Sabirin said that the central bank, like
in the previous days, would sell between US$ 1 million and $5
million to prop up rupiah's stance against the American dollar.

"If possible, we can sell between $10 million and $15 million
in the market," he told journalists on the sideline of a seminar
here.

Bank Indonesia has been intervening the market for some time
through state banks. Such an intervention, using the incoming
billions of dollar in foreign loans, helped boost the rupiah to
7,000 level against the U.S. dollar last week from 12,000 level
in early September.

However, political tensions leading to the MPR session has
undermined the rupiah. The rupiah dropped passing the 8,800 level
on Monday and continued to fall to 8,800 level on Wednesday.

Sjahril acknowledged that the special session of MPR could
pose another big threat for the rupiah's standing, "but hopefully
it will be only temporary."

The 1,000 people strong Assembly would convene here on Nov. 10
through Nov. 13 to pave the way for elections in the middle of
next year.

Still, analysts warned that discontent with President B.J.
Habibie's government and its failure to lift the country out of
the crisis could trigger protests similar to those that ended
former president Soeharto's 32 year rule in May.

Currency dealers also warned that the central bank's planned
intervention would be futile as dollar demand would be on the
rise in the lead-up to the Assembly's special session.

"We think the central bank merely wants to scare the market.
So, the market shrugs it off," a chief dealer with a local bank
said.

Dealers said state banks, as usual, also stepped in the market
on Wednesday, selling a limited amount of dollar. However, it
failed to arrest the rupiah fall.

The rupiah opened at 8,250 to the dollar in Jakarta foreign
exchange market and slumped to hit an intraday low of 8,900
before settling at 8,800 at the close.

"If there was no intervention by state banks, the rupiah could
have broken the 9,000 level," the chief dealer said.

He warned that the rupiah would slide further to break through
the 10,000 barrier as more and more players took long dollar
position due to escalating worries over prospects of massive
violence similar to that in May.

Minister of Information Muhammad Yunus said that President
Habibie asked the public not to get panic and ensured that in the
worse scenario, the rupiah would not reach 20,000 to the dollar.

"He (Habibie) said we should not worry that the rupiah would
rise again to 20,000 if there is a violence. ... We need not too
worried because it will only benefit speculators," Yunus said.

Unlike the rupiah, share prices in the Jakarta Stock Exchange
(JSX) soared 4.1 percent, with JSX Composite Index rising 13.27
points to close at 330.45.

Trading turnover totaled 305.10 million shares valued at Rp
440.85 billion changing hands.

Gainers led loser by 50 to 31 with 79 stocks unchanged.

Stockbrokers attributed the increase in the share prices to
foreign investors' massive buying program on most blue chip
stocks especially stocks with dollar valuation to benefit from
the rupiah's drastic fall.

Mashill Jaya Securities' research head Edhi S. Widjojo said
that despite lingering concerns over the political climate in the
run-up to the special session of MPR, some foreign investors had
seemingly targeted Indonesia as one of the overweight market to
enter.

He said global investment funds like Goldman Sach and Morgan
Stanley had selected Indonesia as one of the markets to enter
after most of its stocks had bottomed.

"There is a switch of mind in the way foreign investors view
our market," he said. (rei/prb/aly)