Rupiah remains under pressure, closes at 9,855
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.