Rupiah rebounds on foreign dollar selling

Rupiah rebounds on foreign dollar selling

JAKARTA (JP): The rupiah recovered against the U.S. dollar
yesterday on regional positive sentiment and Bank Indonesia's
mild intervention as the stock market ended slightly lower in
lackluster trading, dealers and brokers said.

Currency dealers said improving regional currencies and Bank
Indonesia's intervention in afternoon trading helped the rupiah
recover to 3,270 against the greenback from yesterday's low of
3,345 in midday trading.

The spot rupiah closed at 3,275/3,300, compared with the
opening of 3,250/3,300.

"Bank Indonesia was seen in the market when the rupiah was at
3,305 yesterday," a local bank chief dealer said.

The dealer said the amount of dollars sold by the central bank
was limited, but enough to shore up the rupiah as trading
activities were meager.

Foreign exchange market analyst Theo F. Teomion acknowledged
that Bank Indonesia's persistent market intervention had proved
effective in preventing the rupiah from falling further.

But it would not be effective in the long term, he said,
arguing that the rupiah would eventually weaken when the central
bank left the market.

"Bank Indonesia's intervention by selling dollars will
eventually become ineffective in the current situation," he said.

Some dealers said some foreign operators, mainly Japanese,
helped prop up the rupiah yesterday by selling dollars and buying
rupiah.

However, the volume remained small yesterday, with trading
mostly coming from state banks and foreign banks, while local
private banks were rarely involved, they said.

They said liquidity was sufficient yesterday, although some
private banks still held onto excess funds to anticipate a
possible run by depositors.

The overnight rupiah fell in a range from 13 percent to 15
percent in the afternoon from 35 percent to 40 percent in the
morning.

Swap rates were also lower in the afternoon, with the tom/next
swap rate at 1 point/2 points, one-week at 17.5/22.0, one-month
at 50/55, two at 95/110, three at 145/180, six at 230/300 and
one-year at 450/550.

The strengthening rupiah did not help trading activities on
the Jakarta Stock Exchange (JSX) as the composite index fell 3.84
points to close at 490.98.

Total turnover was 326.48 million shares worth Rp 353.6
billion (US$108.8 million).

Some brokers and stock analysts attributed yesterday's fall to
increasing market worries over the tense conflict between
President Soeharto's second son Bambang Trihatmodjo and half
brother Probosutedjo against Minister of Finance Mar'ie Muhammad
over the closure of their banks by the latter.

Bambang, who owns 25 percent of closed Bank Andromeda, sued
Mar'ie and Bank Indonesia governor J. Soedradjad Djiwandono
yesterday for closing the bank.

Probosutedjo said he did not rule out bringing the government
to court over the closure of his bank, Bank Jakarta, as well.

"I think investors are very concerned right now with the
liquidation of the 16 banks and the political clout stemming from
the conflict between high-profile businessmen and the finance
minister," one broker with a joint-venture securities house said.

However, sales director of BZW Niaga Securities Adnan Tan
disagreed and argued that the index fell yesterday as the market
had discounted the massive financial package sponsored by the
International Monetary Fund long before it was announced last
week.

In addition, Tan said, the fall of stock prices on the JSX was
not an isolated case but a global trend.

"It's just a global move of funds out of Asia. It's just a
downward trend for all Asian markets. There's nothing wrong with
the government's move to liquidate the banks. The government has
done its best," he said. (aly)