Rupiah recovers after free fall against dollar

JAKARTA (JP): The rupiah finally broke the psychological 10,000 barrier against the U.S. dollar in Singapore yesterday after a series of new lows in the last several days.

But in Jakarta, the rupiah's free fall stopped at 9,900 against the dollar and even recovered to 7,600/9,800 in the afternoon due to massive dollar selling by state banks.

The weakened rupiah dragged down stock prices, pushing the Jakarta Stock Exchange's (JSX) main price index down 11.95 percent to close at 347.10.

Panic buying of basic food commodities took place at several large grocery stores and supermarkets on fear of further steep price rises.

Currency dealers attributed the steep fall of the rupiah to the worsening of public confidence in the economy and the International Monetary Fund's disappointment over the government's program in coping with the monetary crisis.

Currency dealers said the panic atmosphere in the market might place stronger pressure on the rupiah, given the fact the government lacked commitment in supporting the ailing currency.

"I think the rupiah will get worse in coming days. It's possible that we'll see the rupiah touch 12,000," a chief dealer at a local private bank said. "As you see the dollar being dried up, there's no natural buying of rupiah."

The spot rupiah closed at 9,600/9,800 in Jakarta against an opening of 8,000/8,200 in the morning session.

The currency opened at 10,100 in London and 10,000 in Singapore on unfounded rumors about a worsening of Indonesia's political situation.

The dealers said Bank Indonesia, the central bank, entered the market to sell dollars through state banks but the intervention, which was made when the rupiah reached a level of between 9,100 and 9,500, had no significant impact on cooling down dollar demand.

Dealers said there was clear evidence Singapore operators dominated trading yesterday.

"Though there was some dollar selling by local investors, the dollar-buying dominance of Singapore operators further dragged the Indonesian currency down," another dealer said.

Trade volume remained thin with each transaction valued at between US$1 million and $2 million. "In a thin market like this, a small transaction could easily affect the rupiah's value," he said.

Stock prices on the JSX fell 11.95 percent yesterday as investors were worried the steep drop in the rupiah would further worsen the already ailing performance of most locally listed companies.

The JSX composite index, which lost 72 points in the morning session, recovered slightly in the afternoon. The price index fell 12 percent to close at 347.10.

Head of research of Pentasena Securities Mohammad Syahrial said the public had lost confidence in the government as economic and financial reforms introduced by the government over the past six months failed to result in any improvement to the economy.

"Economic reforms accompanied by political reforms should be announced to avoid any further bankruptcies and public panic," he said.

Syahrial said most listed companies on the JSX had suffered from liquidity crisis due to the persistent decline of the rupiah and the monetary crisis hammering the country over the past few months.

He said of the 282 companies listed on the JSX, only 22 were performing well enough with their cash flow to survive the economic crisis.

"Many that remain have technically gone bankrupt due to a shortage of cash flow," he said.

The 22 companies were involved in telecommunications, mining and food services, he said. (aly)

Panic -- Page 3

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