Rupiah strengthens on reform commitment

JAKARTA (JP): The rupiah bounced back more than 20 percent at its peak yesterday, after a dramatic collapse Thursday, thanks to the central bank's support and various positive news in the market.

Currency dealers said sentiment had improved after U.S. President Bill Clinton spoke with President Soeharto about the economic crisis and the latter voiced his commitment to reforms agreed upon with the International Monetary Fund (IMF).

The rupiah topped 7,600 against the U.S. dollar in the morning trading session yesterday before ending at 7,800/8,300, compared to an opening of 10,200/10,700.

Minister of Finance Mar'ie Muhammad voiced optimism that the rupiah would continue to strengthen and the government would continue its efforts to stabilize the rupiah.

"Thank God the rupiah has strengthened," said Mar'ie.

Dealers said they were surprised by the sharp increase of the rupiah yesterday amid political concerns and the people's panic in buying basic needs.

"We are really surprised by this sharp increase in the rupiah, just as we were surprised when the rupiah sharply dropped yesterday (Thursday)," a dealer said.

Currency dealers said the rupiah got support from Bank Indonesia, the central bank, through state banks and some dollar selling by Singapore operators.

The dealers said state-owned Bank Ekspor Impor Indonesia and Bank Dagang Negara were seen selling a significant amount of dollars in the spot market.

"Besides, Singapore operators who bought a lot of dollars the previous day sold quite a bit yesterday, which brought the rupiah up," a dealer with a local private bank said.

However, the stock market did not trail the strengthening rupiah. It failed to hold early gains and shed more than 1 percent.

The Jakarta Stock Exchange composite index closed 4.13 points lower to 342.97, off a high of 362.79 in the morning, from 347.10 the previous day.

The Jakarta currency market was symbolically marked by dollar selling by President Soeharto's eldest daughter, Siti Hardiyanti Rukmana, who campaigned for dollar selling by Indonesians.

She sold about $50,000 of her savings account at state-owned Bank Bumi Daya to buy rupiah.

Bank Indonesia Governor J. Soedradjad Djiwandono said he welcomed such an initiative. (aly/rid)

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