Rupiah recovering from assaults
JAKARTA (JP): The Indonesian rupiah, helped by the central bank's intervention, recovered yesterday from speculative attacks that drove it to a historic low Monday, dealers and brokers said.
They said the rupiah strengthened to 2,570/2,575 against the U.S. dollar from an opening of 2,633/2,643 after the central bank intervened in the market at midday.
The rupiah was quoted at 2,578/83 at 16:30 Jakarta time, the close of local trading. The rupiah plunged to a historic low of 2,650/2,655 Monday.
The stock market also found support, with the composite index gaining 0.04 percent in the afternoon before easing back to 711.44 points, down 0.13 percent at the close of late profit taking.
The index fell 1.6 percent to 712.40 points Monday as rupiah panic spilled over to the stock market.
Minister of Finance Mar'ie Muhammad said the government had no plans to change monetary policy in the wake of the speculative assaults on the rupiah.
"The government is optimistic that the situation is improving," Mar'ie told journalists after accompanying the president of the Asian Development Bank, Mitsuo Sato, meeting President Soeharto.
He said the turmoil in the currency market was speculative and it could not continue for long because speculation implied a hit- and-run strategy.
"The most important things are that our fundamentals are strong and the government will continue to pursue a consistent monetary policy," Mar'ie said.
Bank Sumitomo's Singapore branch manager Yasuji Sumitomo supported Mar'ie, saying the current attacks on the rupiah would not reduce foreign confidence in Indonesia's economic performance.
Speaking to journalists after signing an $80 million loan agreement to the Bimantara group here, Sumitomo said the weakening of the rupiah should not be a concern for foreign creditors.
Minister Mar'ie assured the public that the government had enough reserves to fight back against speculators.
Dealers said Bank Indonesia, the central bank, injected some $1 billion into the foreign exchange market yesterday through state and local private banks.
The central bank pumped some $500 million into the market Monday, when rupiah made the largest single-day loss by plummeting almost 5 percent.
Yesterday, the central bank entered the market at midday through state banks, forcing the dollar to 2,570/2,575 level.
"This intervention triggered cut-loss selling in dollars," a dealer with a local private foreign exchange bank said.
"The central bank should continue to protect the rupiah because I think the battle is not yet over. They (speculators) may just stay aside when the central bank intervenes and are ready to counterattack later," a dealer at another foreign exchange bank said.
Besides direct intervention, the central bank also used market operation by raising short-term money rates to discourage speculators from borrowing rupiah to buy dollars.
The central bank raised the rates for one-to-six day Bank Indonesia Certificates (SBI) by about 25 basis points yesterday to 12 percent.
But it maintained the seven-day SBI at 7.5 percent, two-weeks at 8.5 percent, one-month at 10.5 percent, three-months at 11.0 percent, six-months at 11.625 percent and one-year at 12.25 percent.
Securities analysts and brokers said the rupiah recovering yesterday had helped trading activities in the capital market yesterday.
"The trading activities was considered flat yesterday because investors are in a 'wait and see' position on where the rupiah is leading," Sales Director of ING Baring Securities Darwin Sutanto said yesterday.
Schroders Indonesia's John Rachmat said though the market was dull yesterday, stock transaction activities would recover later this week. (aly/rid)
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