Rupiah shoots up to 10,000 against greenback, shares dip

JAKARTA (JP): The rupiah continued to rally for the second consecutive day on Tuesday, rising 5.4 percent to close at 10,000 against the U.S. dollar, currency dealers said.

They said market talk on the possibility of more diligent monitoring of capital flows and persistent dollar selling by several state banks contributed to the rupiah's strong standing.

But talk of monitoring capital flows caused share prices on the bruised local market to slide further, with the benchmark price gauge falling 1.2 percent, stockbrokers said.

Currency dealers said that most offshore operators, especially those from Singapore, were unnerved by talk of capital controls after the rupiah breached the 10,500 level during the morning trading session.

"Singapore operators sell their dollars whenever the rupiah breaches the 10,500 level," Freddy Khou, country treasurer of CitiBank Indonesia, said.

Tuesday's closing price of 10,000/10,100 against the dollar was 5.4 percent higher than Monday's close of 10,575.

Talk of capital controls emerged in Jakarta again on Monday after Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said the government was studying ways of monitoring foreign exchange flows into and out of the country. The measures under consideration include requiring firms to deposit export earnings in domestic banks.

Sentiment on the rupiah was also boosted by improving sentiment on regional currencies, most of which recorded big gains on Tuesday, dealers said.

They said the rupiah was also buoyed by moderate but persistent dollar-selling by several state banks.

"Although the amount was limited, dollar selling by state banks succeeded in improving sentiment on the rupiah on Tuesday," another dealer with a local private bank said.

The dealer predicted that unfaltering bullish sentiment on the rupiah would soon bring the currency back above the 10,000 level.

However, lingering fears over the possibility of political unrest ahead of the Indonesian Democratic Party (PDI) congress in Bali from Oct. 8 to Oct. 10 could curtail the rupiah's upward trend, he added.

"But if there are no reports of clashes, the rupiah should go on toward 9,500 (against the dollar)," the dealer said.

Despite the strengthening rupiah, stock prices on the Jakarta Stock Exchange (JSX) closed 1.2 percent lower, with the JSX Composite Index falling 3.20 points to 258.10.

Trading turnover was valued at Rp 145.56 billion (US$14.5 million), with 282.34 million shares changing hands.

The institutional sales director with Mashill Jaya Securities, Antonio Yongnata, said foreign selling pressures on certain blue chip stocks had been responsible for the falling index.

Talk of capital controls and the bleak outlook for most listed firms have triggered a selling spree among foreign investors, he added.

"Share prices for some big cap stocks are undervalued but investors never know whether prices reflect the companies real fundamentals," he said.

The head of research at Sigma Batara, Fadjar Limin Sutandi, added that foreign investors would continue to shun Indonesia while its medium and long-term economic outlook remained gloomy.

Besides, he added, they have been discouraged by the government's slow response to the country's dire economic conditions. (aly)