Rupiah rises 8 percent on joint intervention, reform

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