Rupiah staggers on market confusion over govt policies

Rupiah staggers on market confusion over govt policies

JAKARTA (JP): The rupiah tumbled yesterday to break the
psychologically sensitive 10,000 level on mounting confusion over
the government's controversial currency board system plan and the
fate of the International Monetary Fund's bailout package,
currency dealers said.

They said the rupiah, which had been relatively stable over
the past few weeks, dropped to close at 10,400/10,600 against the
U.S. dollar yesterday from its opening of 9,500/9,800 in the
morning session.

Yesterday's closing rate was 11 percent lower than the 9,450
closing rate the previous day.

Dealers said there had been significant market speculation
that the next US$3 billion tranche of the IMF's aid package for
Indonesia would be delayed by two or three weeks.

Currency dealers said the delay sparked wild talk in the
market that the IMF might be considering suspending the second
tranche disbursement.

"Though nothing is clear yet about the delay. But if this
happens, Indonesia's paralyzed economy would further deteriorate
in the coming months," a chief dealer with a local bank said.

"I think this is the main reason for the falling rupiah in the
currency market today," he said.

He said financial market talks on the possibility of shelving
the currency board proposal -- the factor which had caused the
rupiah to stabilize over the past few weeks -- put stronger
pressures on the currency yesterday.

Dealers said President Soeharto's currency board plan had
prompted many foreign operators to unload their dollar holdings
for rupiah over the past four weeks.

"But the latest talks on shelving the currency board plan in a
three year time prompted foreign operators to attack the rupiah
again," another chief dealer with a state-owned bank said.

He added that the central bank was not seen in the market
yesterday.

Most currency dealers shared the view that the government
should come up with something bold and decisive to heal the
country's ailing economy, otherwise the rupiah might fall further
to unchartered territory in the coming days.

"I'm afraid the rupiah could drop further if the government
does not come up with something positive for the market," a
dealer said.

The rupiah reached an all-time low of 17,000 in early January,
losing more than 80 percent of its value against the American
dollar since July.

As the rupiah weakened, stock prices on the Jakarta Stock
Exchange (JSX) rose 2.7 percent on the back of speculative local
buying for certain selected stocks like PT Telkom, Indosat and
Tambang Timah, stockbrokers said.

Brokers said foreign investors bought the stocks on the back
of the weakening rupiah to benefit from the differential in the
domestic and foreign price.

"It is just arbitrage trading as usual," a broker with a local
securities said.

The JSX Composite Index rose 13.57 points to 516.48 points
yesterday from 502.91 the previous day on a total turnover of
516.48 million shares on the regular market valued at Rp 502.91
($50.29 million).

But most brokers said trading activities were losing direction
as they saw major sell-offs in the morning session by big foreign
brokerage houses.

The head of equities at Bahana Securities, Bruce Rolph, said
large foreign brokerage houses like ING Barings, Indosuez WICarr
and Jardine Fleming Nusantara were net sellers in the morning
which led the main index to decline.

However, speculative buying by other foreign and local
brokerage houses on certain blue chip stocks helped the index
rise in afternoon trading, he said. (aly)