Rupiah strengthens on hopes of new CGI aid

JAKARTA (JP): The rupiah continued to gain ground yesterday, touching 12,800 against the U.S. dollar amid hopes of a favorable outcome to the Consultative Group on Indonesia (CGI) meeting in Paris, currency dealers said.

They said bullish sentiment on the rupiah, though only traded moderately yesterday, was buoyed by market expectation that international donors grouped in the CGI would pledge more funds to help the country's battered economy.

"I think the rupiah's gains have been as a result of the CGI meeting," a chief dealer with a private bank said.

International donor countries grouped in the Consultative Group on Indonesia (CGI) said they would consider providing sizable new loans to Indonesia yesterday evening.

The World Bank, which chairs the CGI, has said it was looking to the CGI to pledge between $7 billion to $8 billion to Indonesia in the financial year ending on March 31, 1999. Last year CGI countries disbursed $5.3 billion.

"The expectation of additional funds from the CGI sent positive sentiment through the market," the dealer said.

Profit taking

But currency dealers said that after rising to 12,800, the rupiah fell back to 13,000 at the end of trading yesterday as market speculators started to take profits.

"Some market participants scrambled to square their long rupiah positions after the rupiah broke 13,000," the dealer said.

The Rupiah was slightly firmer at yesterday's close compared to the previous day, when it stood at 13,100 at the end of trading.

But currency dealers expressed concern that the bullish trend would not last for long because concerns over the country's social and security problems have not yet been properly addressed.

"If the rupiah manages to break the 12,500 mark in the short run, then we could expect it to strengthen to 12,000 shortly after," the dealer said.

"But I doubt if it could get near the 10,000 level yet," the dealer said, citing domestic social and security concerns as the main reason.

Buoyed by positive sentiment stemming from the strengthening rupiah and hopes of a favorable outcome to the meeting of international donors in Paris, trading on the Jakarta Stock Exchange (JSX) was active yesterday, although the benchmark price index fell slightly lower, stock brokers said.

The JSX composite index fell 2.40 points to 482.68 on a total turnover of 354 million shares valued at Rp 433 billion.

Gainers outnumbered losers by 60 to 45 with 88 stocks unchanged and 95 others untraded.

Stock brokers said that persistent arbitrage-related selling in overseas listed companies like PT Telkom and PT Indosat caused by the strengthening rupiah drove the price index down.

"Heavy selling of the two stocks helped push the index down," Christina Lim of Harita Kencana Securities said.

Shares in market leader PT Telekom, which accounts for 17 percent of the market capitalization in the local exchange, fell Rp 25 to Rp 4,350 with 15 million shares traded, and international call operator PT Indosat shares dropped Rp 400 to Rp 14,325 on 38,000 shares traded. (aly)