Rupiah strengthens, stock prices ascend

JAKARTA (JP): The rupiah extended gains against the American dollar yesterday, supported by market optimism on the government's determination to continue reforms, currency dealers said.

Stock prices on the Jakarta Stock Exchange (JSX) also gained ground, with the benchmark price indicator rising 5.4 percent.

Currency dealers said the market was optimistic about the outcome of negotiations between the International Monetary Fund (IMF) and the government on economic reforms to be announced today.

"We've seen a strong appreciation of the rupiah against the U.S. dollar over the last few days due to the improving sentiment," a dealer with a state bank said.

The spot rupiah closed at 7,400/7,600, compared to an opening of 8,000/8,200. It topped 7,200 yesterday, from an early low of 8,300.

The rupiah crashed to an all-time low of 10,000 against the dollar on Thursday last week.

Dealers said trading remained thin with most overseas operators seen selling dollars in the market, due to fears of the rupiah strengthening.

"Many Singapore operators were selling a lot of dollars in the market yesterday. They feared the conclusion of talks, to be announced by the government tomorrow (today), will put the rupiah on an upward trend," a dealer said.

Dealers were upbeat about the rupiah strengthening to 7,000 or even 6,000 if the reform package, to be announced today, satisfied the market.

"I'm personally optimistic the rupiah will reach that level by the end of the month if the government introduces measures as required by the market," the dealer said.

As the rupiah recovered, stock prices on the JSX rose 5.4 percent, with the composite index closing 21.85 points higher to 403.98 yesterday.

Over 781 million shares changed hands in the regular market worth Rp 812.88 billion (US$109.84 million).

"I think the overall mood was really good today (yesterday) with most domestic investors buying big in blue-chip stocks," a broker with a joint-venture brokerage house said.

An analyst with a joint-venture securities firm said trading activity over the past few days was largely based on speculation rather than fundamentals.

"I think the market is focusing on the IMF now. Anything good in the capital market in the last few days is associated with talks between the IMF and the Indonesian government," the analyst said.

"If the government comes up with concrete economic reforms, the market will surely catch up in the coming weeks. If not, the market will punish it even more," he said. (aly)

Currencies -- Page 11