Rupiah strengthens against U.S. dollar

JAKARTA (JP): The rupiah strengthened impressively yesterday closing at its highest level in a month at 8,700 against the U.S dollar due to renewed confidence in the country's economy.

Currency dealers said the market shrugged off local newspaper reports of sporadic riots in several towns in East Java and Sulawesi.

The dealers said Singapore Prime Minister Goh Chok Tong's proposal to help Indonesia settle its import financing problems created new optimism in the country's economy.

Goh proposed Tuesday the establishment of a multilateral committee to guarantee letters of credit (L/Cs) issued by Indonesian banks to help Indonesia finance vital imports.

Indonesian importers have complained the past few weeks that foreign banks are reluctant to take L/Cs issued by Indonesian banks fearing the latter are unable to service their commitments.

"The Singapore Prime Minister's proposal created a new optimism over the country's ailing economy," one dealer said.

"This prompted dollar selling by local and overseas funds. This is the main factor for the strengthening of the rupiah," he added.

Dealers said the rupiah's surge was also due to the central bank repeatedly intervening.

"But we have no confirmed details on the amounts of intervention by the central bank," another dealer said.

Spot rupiah closed at 8,700/9,000 against the American dollar from its opening at 9,900/10,200.

The rupiah closed at 9,900/10,200 against the American dollar the previous day.

"The rupiah maintained its upward trend against the U.S. dollar for the whole trading day, though trading volume remained thin," a dealer said.

Most currency dealers expected the government would make new financial moves in the near future to further bring the rupiah closer to the 5,000 mark, the exchange rate used by the government in calculating the 1998/1999 fiscal year budget beginning in April.

The rupiah hit an all-time low of 17,000 against the American dollar in early January due to mounting fears that Indonesian corporations could not pay their huge overseas debts.

As the rupiah strengthened, stock prices on the Jakarta Stock Exchange (JSX) declined 3.14 percent on persistent profit taking for the second consecutive day in a correction of Monday's gains, brokers said.

The JSX Composite Price Index dropped 16.86 points to 519.92 points from 536.79 the previous day with a total turnover of 759.73 million shares on the regular market valued at Rp 687.19 billion (US$78.98 million).

Stockbrokers said market sentiment remained negative for the whole trading day yesterday as most foreign investors focussed on profit taking on bellwether stocks like PT Telkom and PT Indosat.

"Profit taking by foreign investors dominated trading activities in the bourse yesterday," a broker with a joint- venture securities said. (aly)