Rupiah slides slightly, local stocks lose ground

JAKARTA (JP): The rupiah failed to hold its ground against the U.S. dollar on Thursday, closing 2.3 percent down at 7,550 as stock prices slid 0.8 percent, currency dealers and stockbrokers said.

Dealers said the rupiah, which opened at 7,425, came under pressure for the whole trading day as the result of fresh dollar demand from local banks settling debts quoted in foreign currency.

"A moderate dollar demand from commercial banks kept the rupiah under pressure," a chief dealer with a local private bank said.

However, dealers said that daily trading volume, at around US$30 million, remained negligible compared to its pre-crisis level of $10 billion.

They said that high political risks in the country had caused dealers, especially offshore dealers, to shun the local market.

"Most market participants do not know how the political situation in the country will evolve and how it will affect the economy," the chief dealer said.

In times like this it is difficult to predict what will happen to the rupiah next year, even though it has stabilized at around 7,500 against the dollar over the past two months, dealers explained.

An official report recently predicted that the rupiah would remain at between 7,000 and 8,000 against the dollar next year.

On Thursday, Bank Indonesia governor Sjahril Sabirin expressed his optimism that the rupiah could advance toward the 6,500 level by the end of the year, provided December's inflation rate remains low.

He said that recent trading in the rupiah had been influenced more by positive news about the country's economy and less by outside factors.

"The government's efforts to improve the economy have boosted confidence," he told a hearing with House of Representatives' Commission VII for finance and the state budget.

Share prices on the Jakarta Stock Exchange (JSX) declined 0.8 percent on Thursday, with the JSX Composite Index losing 3.16 points to close at 393.79 on a total turnover of 229 million shares valued at Rp 196.58 billion.

However, gainers led losers by 45 to 44, with 103 stocks remaining unchanged.

Stock brokers attributed the fall in share prices to a combination of profit taking on gains made the previous day and bearishness in other equity markets in the region.

Most regional equity markets dipped on Thursday, dragged down by an overnight loss on Wall Street caused by news of massive layoffs at the aircraft manufacturer Boeing.

"Share prices on the local bourse felt the negative impact of the fall in other regional markets," Juliana Gunawan, a securities broker with Trimegah Securindolestari said.

She said that several foreign brokerage firms, including Merrill Lynch Indonesia, GK Goh Ometraco, ING Barings Securities and the state securities firm Danareksa Sekuritas sold heavily on Thursday after placing large buying orders over the past few days.

Other foreign securities firms, including ABN Amro and Credit Lyonnais were net buyers on the day, she added.

"But trading activities remained dull, with most investors choosing to ignore the local market," Juliana said. (rei/aly)