Rupiah remains under pressure, closes at 9,855
The Jakarta Post, Jakarta
The rupiah continued to lose ground against the U.S. dollar for the sixth consecutive trading day on Monday, dropping to near the Rp 9,900 level amid continuing high local demand for the strengthening American greenback.
The rupiah closed at Rp 9,855 a dollar, down from Rp 9,770 at last Friday's close. This was the local unit's lowest level for the past two months.
The rupiah's losses in turn put the country's stock market under pressure, although the index managed to hold its ground, with the Jakarta Composite Index ending down just slightly by 0.106 points to 1,138.88.
The rupiah has been weakening over the past several weeks as a result of huge dollar demand from state oil and gas firm PT Pertamina to finance oil imports in its effort to return the country's recently declining fuel stocks to a "safe" level of 22- days supply.
The situation has been exacerbated by the fact that global oil prices recently touched a record high of $60 per barrel, making Pertamina's import costs even higher.
Other local companies, meanwhile, compounded the problem with strong demand for the dollar to finance their own import needs and pay maturing foreign debts.
In terms of external factors, things were no more better for the rupiah as the dollar continued its winning streak against the euro and the Japanese yen, and the market maintained its expectation that the U.S. Federal Reserve would continue to increase its benchmark interest rate.
The Fed raised its benchmark interest rate to 3.25 percent last week, making the greenback more attractive to the market.
Indeed, when the rupiah passed the psychological level of Rp 9,800 on Monday, the local market quickly started buying up whatever dollars were available on fears that the rupiah would continue to fall, which in turn only pushed the rupiah down further.
Suspected intervention by the central bank through state banks proved useless as the demand for dollars consistently exceeded supply.
In the light of the local units seemingly inexorable decline, State Minister for National Development Planning Sri Mulyani Indrawati said on Monday that the government hoped the central bank would immediately tighten up monetary policy so as to defend the rupiah and prevent its freefall from affecting the country's macroeconomic fundamentals.
Bank Indonesia (BI) deputy governor Aslim Tadjuddin said last week that the rupiah was undervalued by 8 percent at its current level and that the central bank would continue intervening if necessary.
The central bank recently unveiled a plan to issue a new ruling limiting overseas dollar inflows without underlying assets to a maximum of US$1 million in order to curb dollar speculation. The ruling, however, will only come into effect on July 14.