Rupiah rides out wild trading amid political uncertainly

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)