Rupiah stabilizes but more attacks expected

JAKARTA (JP): The Indonesian rupiah was stabilizing against the U.S. dollar yesterday, but dealers warned that attacks on the rupiah would continue this week.

Dealers said the rupiah was on the way to recovery before fresh pressure on the baht spilled over to the rupiah and other regional currencies and pushed rates lower against the dollar.

Dealers said the rupiah strengthened to a high of 2,530/2,535 from 2,570/80 open following a thin intervention from Bank Indonesia, the central bank, but fell again to 2,585/95 at close.

The Jakarta stock index also gained ground, closing 0.95 percent higher yesterday to 718.18 on the back of mild gains in heavyweight stocks following a slight strengthening in the rupiah, brokers said.

Economist Sjahrir said that current speculative attacks on the rupiah were temporary and predicted they would ease by the end of this week.

"The assaults on the rupiah are temporary. The rupiah is expected to reach an equilibrium level later this week," Sjahrir told journalists after attending a seminar on the 1996 economic census.

He said there was no ground to speculate that a rupiah devaluation was imminent.

"As the movement of the rupiah is still within the (intervention) band, there is no need to devalue the currency," Sjahrir said.

Minister of Finance Mar'ie Muhammad reiterated Tuesday that devaluation was entirely out of question in the current managed floating policy on the rupiah.

In the current policy framework, there would be only depreciation or appreciation of the rupiah, Mar'ie said.

Dealers said the rupiah was trapped in range trading throughout the day, with minor intervention by Bank Indonesia but new jolts in Thailand eroded the central bank's initiative.

"After the rupiah strengthened, overseas players showed their resistance and this drove investors, including local corporations, to hedge their rupiah position against the dollar," a dealer with a local foreign exchange bank said.

He said the baht spillover triggered operators to buy swaps, whose rises were limited because the market had been long.

One-month swap remains stable at 18.0/20.0 points, two at 37.0/42.0, three at 60.0/66.0 and six at 118.0/125.0.

Bank Indonesia yesterday raised again overnight rates for short-term papers (SBI) to 13.0 percent from 12.0 percent to discourage speculators from borrowing rupiah to buy dollar.

The central bank maintained the rate for five-six-day SBI at 12.0 percent, two-week at 8.5 percent, one-month at 10.5 percent, three at 11.0 percent, six at 11.66 percent and one-year at 12.25 percent.

The central bank kept its intervention band at 2,378/2,682 but lowered the conversion band to 2,549/2,597 yesterday from 2,576/2,624 Tuesday.

Stockbrokers said foreign and local investors in the capital market were entering the market again as confidence in the rupiah had returned.

"I think most investors have realized that the panic in the early week has gone because the rupiah has slowly recovered," president of Harita Securities Christina Lim said yesterday.

"The strong trading activities are based on a technical rebound after it declined sharply in the early week," she said.

Total trading turnover reached 273.59 million shares changing hand on the regular market valued at Rp 735.21 billion (US$288.31 million).

A dealer with a joint-venture brokerage firm said some investors were still waiting for further development of the rupiah while others were confident the rupiah would not drop further.

"These confident investors entered the market and supported the increase in trading activities yesterday," the dealer said.

Several big cap stocks gained higher yesterday including PT Telkom by Rp 125 to close at Rp 4,000, Indosat by Rp 150 to Rp 7,550, cigarette maker Gudang Garam by Rp 100 to Rp 9,375 and Sampoerna by Rp 25 to Rp 9,225. (aly/rid)

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