Rupiah rises 8 percent on joint intervention, reform
JAKARTA (JP): The rupiah rose 8 percent against the U.S. dollar in hectic trading yesterday as Indonesian, Singaporean and Japanese central banks jointly intervened in the market to support the rupiah, dealers said.
The rupiah surged to a high of 3,240 against the greenback before closing at 3,270/3,300, compared with an opening of 3,540/3,555.
Minister of Finance Mar'ie Muhammad said in a statement that there was a concerted effort by Bank Indonesia, the central bank, and Singaporean and Japanese central banks to support the rupiah.
"Bank Indonesia acted in the local market today (yesterday), together with both the Bank of Japan and the Monetary Authority of Singapore in support of the Indonesian rupiah," Mar'ie said.
"Today's concerted effort was aimed at strengthening the rupiah to levels more appropriate with the fundamentals of the Indonesian economy," Mar'ie said.
Mar'ie noted the joint effort would contribute positively to the implementation of the reform package which was supported by financial assistance from the International Monetary Fund (IMF), the World Bank and the Asian Development Bank.
He said the three monetary authorities were ready to take necessary steps in the future to maintain the stability of the rupiah as part of the program to achieve currency stability in the region.
Singaporean and Japanese finance ministers were quoted by Reuters and AFP as saying that their central banks had intervened to show confidence in the macroeconomic policies of the Indonesian government.
"Singapore's participation in this joint intervention reflects our confidence in the macroeconomic policies of the Indonesian government," Singaporean Finance Minister Richard Hu said in a statement.
Japanese Finance Minister Hiroshi Mitsuzuka, in a different statement, said: "This operation is aimed at correcting the excessive depreciation of the Indonesian rupiah."
Currency dealers said the amount of intervention was quite large yesterday. An estimate put it at some $1 billion.
Besides joint intervention, dealers said, positive sentiment in the government's reform package and tight liquidity also shored up the rupiah's value.
They said the mood was positive after a weekend of encouraging moves to regain public confidence and yesterday's announcement of further deregulation measures to strengthen the economy.
"I think market confidence in the country's economy is improving bit by bit as the government moves decisively to strengthen the economy," a local bank dealer said.
Dealers said liquidity was sufficient in the morning but increasingly tight in the afternoon following the closure of 16 insolvent banks by the government on Saturday.
"Some operators have held on to excess funds in anticipation of possible runs by depositors," a dealer said.
Overnight money was quite mixed, with some banks paying 13 percent to 14 percent in the afternoon, while others paid above 40 percent and some even 100 percent, he said.
The strengthening rupiah failed to impress the Jakarta Stock Exchange, whose composite index flatly ended at 501.71 from Friday's close of 500.41.
Turnover totaled 510.7 million shares worth Rp 621.43 billion ($188.3 million).
Trimegah Securities head of research David Chang said the market was somewhat positive about the government's reform package but still cautious about the possible impact of the liquidation of 16 banks on some listed firms.
"The package is good for the economy in the long run. The reform is good because it shows foreign investors that the government is willing to make painful adjustments to turn the economy around," Chang said.
"But in the short term, the economy may have to suffer. The closure of 16 banks could drag down sound companies. That's why people are very, very careful now, waiting for the consequences," he added. (rid)
Currencies -- Page 11