Rupiah stays in 7,000 territory to U.S. dollar

JAKARTA (JP): The rupiah rallied on Monday afternoon to stay within the 7,000 territory to the U.S. dollar after falling to below Rp 8,000 in early trading.

Currency dealers attributed the surge to heavy dollar selling by local and offshore players, who dumped their dollars for rupiah on a local newspaper rumor that the government would reintroduce the intervention band to limit currency fluctuations.

The dealers said massive dollar selling by offshore operators from Singapore and Hong Kong in afternoon trading reversed the rupiah's downward run.

It boosted the rupiah back to above 8,000 to the dollar, to where it had fallen in the morning.

"I think most overseas operators are afraid that the Indonesian government will soon reintroduce the trading band," a chief dealer at a joint venture bank said.

A local paper reported on Monday that the central bank was currently working on a plan to reintroduce a currency trading band for the rupiah once the currency reached the 5,000 to 6,000 level against the greenback.

However, Bank Indonesia director Miranda S. Goeltom denied the speculative reports saying that the country's monetary authorities were not in any position to reintroduce such a policy.

She said, instead, that the central bank was working on a comprehensive system to improve monitoring of capital flows in and out of the country, DowJones Newswires quoted her as saying.

The government adopted a managed exchange rate to curb the rupiah's fluctuation before the crisis hit the country. But the system, which allowed the rupiah to fluctuate only within a certain range, was abolished in August, last year after it failed to curb the massive speculation following the Thai baht's devaluation. The Thai chaos was blamed as the trigger of the Asian financial crisis.

The rupiah continued to plunge since then to reach 17,000 against the greenback in January from the pre-crisis level of 2,500.

On Monday, the rupiah, which opened at 8,150 in Asian trading, steadily recouped its position to an intraday high of 7,300 due to the rumor, the dealers said.

However, dollar demand by local corporates in late trading weakened the currency to 7,400 against the American dollar at the close, slightly firmer than its close at 7,800 on Friday last week.

The currency dealers estimated the rupiah would remain steady at a range between 7,000 and 8,000 to the dollar in the coming days.

But Fredy Khouw, head of treasury of Citibank Jakarta said that the future direction of the rupiah would be determined by movement of the Japanese yen.

The Japanese yen fell slightly to close at 119,10 against the U.S. dollar in Tokyo on Monday from 118.15 yen in New York in late trading on Friday.

"If the Japanese yen breaks through the 120 level, it will put more pressure on the rupiah," he said.

Like the rupiah, stock prices on the Jakarta Stock Exchange (JSX) strengthened, with the main price index rising 1.9 points to 315.31 on a total turnover of 226.05 million shares changing hands valued at Rp 170.97 billion (US$22.79 million).

Losers led gainers 48 to 28 with 78 stocks remaining unchanged.

Stock brokers said that late buying orders on certain stocks like Indah Kiat and Tjiwi Kimia capped the fall of the main price index which came under selling pressure from the opening of the trading in the morning.

"We do not know why there were sudden buying orders on the two stocks," an institutional sales broker with Trimegah Securindolestari said.

The stock price of Tjiwi Kimia rose Rp 150 to Rp 1,275 on 17.93 million shares changing hands while Indah Kiat Pulp & Paper by Rp 250 to Rp 1,975 on 10.56 million shares. (aly)