Rupiah standing firm alone: World Bank, Ginandjar

JAKARTA (JP): The current strengthening of the rupiah to about Rp 7,500 to the U.S. dollar is not a result of government intervention, the World Bank's Country Director for Indonesia Dennis de Tray and Indonesia's chief economics minister Ginandjar Kartasasmita asserted on Thursday.

Defending his observation, de Tray said his own sources who tracked the market concluded that the rupiah's appreciation over the last few weeks was real and not boosted by central bank intervention.

"The recent strengthening of the rupiah, contrary to what you may have read, is not being driven by Bank Indonesia intervention," de Tray told the Indonesia Forum business conference here.

"This is a real phenomenon, not a Bank Indonesia-generated phenomenon," he added.

Coordinating Minister for Finance, Economy and Industry Ginandjar Kartasasmita, who opened the meeting, asserted that market intervention was not a government policy.

"We had a very bitter experience last year. We spent US$10 billion intervening in the market, and it didn't really do any good," Ginandjar later told reporters.

He confirmed, however, that the government had been buying rupiah by converting part of its international aid funds to meet its budget needs.

"But it's not a large amount of money," Ginandjar added.

The rupiah is currently hovering at about Rp 7,500 to the U.S. dollar, after felling to as low as Rp 15,000 in May at the height of the political crisis following massive riots.

The current level, however, is still far below the precrisis level of about Rp 2,450 in July last year.

Ginandjar attributed the strengthening to "supporting indicators" including the recent rate cuts in the United States and some European countries.

"In particular the decline in the U.S. interest rates allowed the Japanese yen and other regional currencies, including our own rupiah, to strengthen," he said.

He said the rupiah appreciated by an "astounding 40 percent" in October.

Even last week's major unrest, the worst in the city after the violence in May, did not shake the rupiah, he said.

Ginandjar said the strengthening of the rupiah in spite of the political turmoil clearly indicated the market's recognition of the improvements in Indonesia's economic outlook.

However, many analysts do not believe that the rupiah's appreciation reflects real improvements in the economic fundamentals.

They contend that Bank Indonesia's heavy intervention in the thin foreign exchange market has been the main factor behind the strengthening currency.

Economist Sjahrir told the same forum he was not impressed by the strengthening of the rupiah.

"If I had billions and billions of dollars from the IMF and the Asian Development Bank, I think I could easily jack it up to the 5,000 level," he said.

"Speculators are no longer interested in the rupiah market because they know they have to deal with the central bank's powerful intervention," economist Hartoyo Wignyowijoto said Thursday.

The rupiah remained firm against the American dollar on Thursday, closing slightly lower at 7,525 despite lingering worries over the country's political condition.

Currency dealers said that the rupiah, which was traded in a thin volume, fell to an intraday low of 7,700 due to dollar demand by local corporations to settle their overseas debts.

Unlike the rupiah, share prices on the local market ended firmer on Thursday with the Jakarta Stock Exchange (JSX) main price gauge rising 2.5 percent (9.15 points) to 379.11 on a total turnover of 350 million shares changing hands valued at Rp 378.4 billion (US$50.45 million). (das/aly)