Rupiah regains strength, stocks weak
JAKARTA (JP): The rupiah sharply recovered yesterday against the U.S. dollar in early trading but weakened in the afternoon on a surge in demand for the greenback.
Share prices on the Jakarta Stock Exchange (JSX) lost several points at close in thin trading.
Foreign exchange dealers said the rupiah closed at 3,410/20 against an opening of 3,370/90 after hitting a one-day high of 3,350 on heavy sales of one-year forwards by overseas operators.
But it was still lower than the lowest level it recorded Wednesday.
The dealers said that market sentiment seemed to have improved slightly as compared to Wednesday's trading which saw the rupiah plunge to an historic low of 3,470 against the American dollar.
"Rupiah is not so volatile today and we see a two-way trade compared to the previous days' one-way trade," Bank Bira's senior dealer Rudy Gandhi said.
However, he said, persistent demand by local companies to buy dollar deteriorated the rupiah trading, causing the rupiah to slip to 3,420 in the afternoon.
Other forex dealers said there were still a handful of local companies buying the dollar to cover their dollar denominated debt which recently matured.
"I think the strong demand for dollar will make it difficult for the rupiah to sustain its strength," Bank Bira's Rudy said.
He said the volume of forex trading was relatively small hovering between US$200 million and $300 million, much lower than the average $4 billion before the rupiah was floated in early July.
Yesterday's modest trading was marked by the fall of overnight dollar rates to as low as 8 percent from 25 percent Wednesday and Tuesday.
Other analysts said the rupiah's moderate trading partly resulted from a reprieve on other regional currencies as traders suspended their raid to take profit on the dollar's spectacular rise in the last few days.
The analysts said the recent sharp drop in the rupiah indicated the loss of public confidence in the currency.
"I think the government should step in to stop the rupiah's downfall. If not, the fall will continue, ignoring the strength of the country's economic fundamentals," one analyst said.
The currency anguish dampened the buying sentiment at the Jakarta Stock Exchange (JSX).
Investors remained reluctant to enter the market even though most of the share prices were very cheap, said a securities dealer.
"It is certainly time to buy. But no investor wants to benefit from the cheap prices," he said.
The JSX's Composite Index, the main price gauge in the market, fell 0.01 percent to close at 536.92 in thin trading, with only 206.53 million shares changing hands at Rp 284.87 billion ($86.32 million), or a half of the average daily transaction value in June.
"There are no positive market incentives which can boost stock trading and most investors have pulled out of the market already," Christina Lim from Harita Securities said.
She said sluggish market sentiment would continue in the coming weeks when most listed companies had to announce their lower-than-expected third quarter results.
She said the more than 25 percent fall in the rupiah's value had severely hit the country's business activities and this would result in a decline in corporate profit growth.
Another analyst with a joint venture securities company said the market would stabilize if uncertainties in the currency market died down.
"But given the current situation, no one knows when the currency will stabilize.... we are still facing a very difficult time now," he said. (aly)
Currency -- Page 11