Rupiah recovers after touching 12,000
Rupiah recovers after touching 12,000
JAKARTA (JP): The rupiah recovered slightly yesterday
afternoon after touching a day low of 12,000 to the U.S. dollar
on concerns over the future of Indonesia's reform program.
The currency closed at 10,400 against the greenback, gaining
from Thursday's close of 10,500.
Dealers said rumors that Indonesia would abandon International
Monetary Fund (IMF)-sponsored reforms and go ahead with its plan
to peg the rupiah to a foreign currency at a fixed exchange rate
caused jittery dollar buying.
The dealers said investors feared that the Indonesian economy
would further sink if the government decided to abandon the
reform program.
"Frankly, they're just groundless rumors as there is no
positive sign to support such an idea," a chief treasurer of a
joint-venture bank said, pointing to mounting opposition from
international bodies for Indonesia to adopt the system.
"Market rumors like this have dictated the direction of the
rupiah against the American dollar and this will prompt the
rupiah to decline further below the 12,000 level next week," a
chief dealer said.
Most international bodies and the Group of Seven (G-7)
industrialized nations have opposed Indonesia's controversial
plan to implement the currency board system saying Jakarta is not
in a position to adopt the system and urging the country to stick
to the IMF reform program.
The dealers also said overseas operators were making excuses
for profit takings on early gains made in previous days.
They said news on massive foreign exchange losses suffered by
state-owned Bank Ekspor Indonesia (Bank Exim) also played a role
in the worsening market sentiment.
"People were surprised by the news of forex losses incurred by
Bank Exim," another chief dealer with a joint-venture bank said.
Some currency dealers have long known that the bank was
experiencing financial difficulties, but the amount of losses was
much higher than expected, he said.
"But one thing's for sure, Bank Exim's forex losses will
further deteriorate foreign investor confidence in the country's
banking system," he said.
The dealer said Exim's foreign exchange loss was partially
attributed to the central bank's intervention late last year to
shore up the rupiah against the American dollar.
"I think Bank Exim has become a scapegoat for the central
banks' repeated intervention in the currency market to prop up
the rupiah," he said.
Most dealers also attributed the weakening of the rupiah
during the morning session to persistent dollar demand by local
banks and corporations to pay their dollar-denominated
obligations.
"Pairing Bank Exim's forex loss, demand by local banks to
cover their dollar obligations remained high in the morning
session," he said.
As the rupiah recovered slightly, stock prices on the Jakarta
Stock Exchange (JSX) slipped 0.8 percent yesterday as the
rupiah's recovery pushed down selective dollar-sensitive stocks
off their highs, stockbrokers said.
They said foreign investors were in a profit-taking mood
throughout the day, particularly on certain stocks that made a
good run earlier this week.
"I think it's understandable for foreign investors to sell
their stocks for profit taking as the market continues to be
uncertain," a broker with Trimegah Securities said.
The JSX Composite Index closed 4.25 points lower to 512. 23
from 516.48 the previous day.
About 421.82 million shares changed hands on the regular
market valued at Rp 676.95 billion (US$65.09 million) yesterday.
Chandra Nasution, an analyst from Pentasena Securities, said
trading activities in the local exchange had lost direction over
the past few weeks as the government had yet to announce any
clear-cut measures to restore market confidence. (aly)