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)