Rupiah sinks to 14,700 as stocks lose grounds
JAKARTA (JP): The rupiah sank 5 percent yesterday to close at 14,700 against the U.S. dollar as the Japanese yen touched its lowest level since August 1990.
The stock market, battered by sinking turnover, slid 0.46 percent despite gains in dollar-valued stocks which were buoyant on the rupiah's fall.
Stock analysts said that prevailing uncertainties about domestic political and economic stability were also dragging the market down.
"It is so difficult to expect the market to recover in the near future as everyone is in crisis now," Harita Kencana Securities president Christina Lim said.
She added the market could well sag further because confidence was absent in a time of crisis and the market still feared that mass rioting could recur at any time in the future.
"The market could go down further as there is nothing to look forward to in the near future. People are still scared to invest here. Even today, we heard people were rioting somewhere," she said.
It was reported that hundreds of people continued rioting in the town of Tegal in Central Java yesterday, damaging several homes, offices and shops.
Currency dealers said the combination of domestic political and economic uncertainty and a weak yen hit the rupiah, which was already suffering from market illiquidity.
"The yen which fell below 146 to the dollar today (yesterday) was the main culprit behind the fall of the rupiah," a dealer with a local private foreign bank said.
The rupiah hit 15,000 yesterday afternoon before closing at 14,700. It had closed at 14,000 on Friday.
The dealer added that demand for dollars remained high, especially from local commercial banks as Bank Indonesia extended the deadline for them to settle outstanding arrears in their interbank and trade finance debt to June 30.
"So, we can expect that the rupiah will not recover until June 30 as demand for dollars will remain," he said.
He added the sharp fall in the rupiah was aggravated by the very thin trades, with the largest trade amounting to only about one million dollars.
In the money market, dealers said the central bank set rupiah interbank interest rates at 51 percent per annum for this week, down from 53 percent last week.
"We can expect that the central bank is actually moving toward lowering interest rates. We should welcome this move. But the problem is that the IMF might not be happy with that kind of move," Manaek Robert Toruan, the head of Bank Niaga's fixed income desk, said.
The International Monetary Fund has said that the government should maintain tight money policy to prevent inflation from soaring further.
On the stock market, share prices on the Jakarta Stock Exchange (JSX) lost 0.4 percent, with the JSX Composit Index closing 1.871 points lower at 406.501.
Total turnover on the JSX was a meager US$18 million yesterday after averaging only $17 million a day last week.
Stockbrokers said a heavier fall in the index was prevented by gains in stocks with dollar valuations, like telecommunications stocks Telkom and Indosat and tin miner Tambang Timah, as the rupiah sagged to near 15,000.
"If you take Telkom and Indosat out of the market, the market was actually a lot more depressed than you might think," an analyst with a joint venture securities house said. (rid)