Rupiah rides out wild trading amid political uncertainly

JAKARTA (JP): Riding out a session of wild fluctuations, the rupiah closed trading higher against the United States dollar on Thursday.

Currency dealers said political concerns centering on President B.J. Habibie's accountability speech scheduled for Thursday night helped weaken the rupiah in morning and early afternoon trading.

The rupiah, however, recovered later in the afternoon on speculation that Habibie's speech would be rejected by the People's Consultative Assembly (MPR), dealers said.

The rupiah closed at 8,148 on Thursday, up by about 1.5 percent over its 8,275 close the previous day.

The head of the treasury division at Bank Buana Indonesia, Pardy Kendi, said there were players who sold their dollars late in the day to reduce the dollar positions they had accumulated over the past two to three days.

"These players are anticipating Habibie's speech being rejected by the MPR, which would allow the rupiah's value to rebound quickly," he said.

Habibie delivered his accountability speech on Thursday night and the MPR will vote whether to accept or reject the speech on Saturday.

"A rejection would reduce Habibie's chances of being reelected, and if that happens it will increase the more popular Megawati Soekarnoputri's chance of becoming the country's next leader," he said, adding that the election of Megawati would prevent widespread unrest.

He said currency players would base their trading on Friday on the reaction of MPR members during and after Habibie's accountability speech.

"If Habibie gets booed the market will strengthen the following day. The opposite is true if Habibie gets a nice ovation," he said, reiterating that market reaction would not wait for the Saturday MPR vote on Habibie's speech.

Pardy said the rupiah's trading range was extremely wide on Thursday, with players reacting to speculation on whether Habibie's speech would be accepted by the MPR.

"They are buying and selling fast in a hit-and-run scenario," he said, adding that investors were going for thin profits with frequent hits.

Pardy also said the widely rumored government intervention to arrest the rupiah's fall was possible.

Currency and equity markets have become political weapons to be wielded to create positive and negative impressions of certain parties and government policies, Pardy said.

"To use such weapons they need a large amount of money as fuel," Pardy said.

The rupiah had been stable over the past week. It began to move downward when the Golkar Party held its executive meeting and named incumbent B.J. Habibie the party's candidate for next week's presidential election.

The rupiah fell further when President Habibie named Indonesian Military Commander Gen. Wiranto his running mate, pushing the rupiah below the 8,000 level on Wednesday for the first time in October.

An analyst at state-owned securities company PT Danareksa, Joseph Ginting, said the rupiah was trading so thinly that US$1 million could easily move the exchange rate, estimating that average trading volume for the past month was about $75 million.

He said Danareksa sold $1 million in morning trading when the rupiah was near its intraday low and saw the effect of the sale in the currency's rebound later in the day.

"We are converting a $1-million holding into equity investment on considerations that prices on the JSX are already good buys," Joseph said.

The Jakarta Stock Exchange (JSX) Composite Index fell by 4.17 points on Thursday to close at 567.77 in volatile trading.

Joseph denied rumors the government intervened in the market to prop up the index.

He said prices on the local exchange were undervalued and that the rumored intervention would be baseless.

"I saw a number of institutional investors start to accumulate their equity holdings on the JSX today (Thursday)," he said.

Joseph discounted all of the attention paid on Thursday to the fate of Habibie's accountability speech and how the speech would effect next week's presidential election.

He said what was important now was not the executive branch of government but the legislative branch.

"Whether the country's legislative branch loses control over the executive branch like during the New Order regime is a more important issue than who is president," he said. (udi)