Rupiah strengthens to 15,000 to the dollar
JAKARTA (JP): The rupiah improved to Rp 15,000 against the U.S. dollar yesterday following a rally by the Japanese yen and intervention by Bank Indonesia (BI) to reduce domestic demand for the dollar, currency dealers said.
Stock prices on the Jakarta Stock Exchange (JSX) followed in the rupiah's wake and gained almost 5 percent, with the composite index closing up 20.651 points on 440.093.
Currency dealers said the news that Japan's Exim Bank would provide Indonesia with a US$1 billion trade financing facility had also boosted the rupiah.
They added that regional factors, especially the strengthening of the yen to 136 against the dollar, had also contributed to the strengthening of the rupiah.
"We cannot deny the fact that the yen determines the ups and downs of all currencies in the region, including the rupiah," a dealer with a local foreign exchange bank said.
"Yesterday (Wednesday) the rupiah did not track the yen because offshore operators played on the rupiah, knowing that domestic dollar demand was very large. Today (yesterday), they took their profits," he added.
Domestic demand for the dollar increased following BI's instruction to commercial banks to settle their foreign exchange debts and trade finance arrears by June 30.
BI director Miranda S. Goeltom said Wednesday that commercial banks' trade-related foreign debt arrears totaled US$820 million and their non-trade-related debts stood at $200 million.
To reduce dollar demand, BI governor Sjahril Sabirin said the central bank was providing all foreign exchange needed by commercial banks to pay their foreign debt arrears.
"We will provide the necessary foreign exchange to banks which have to settle their trade finance obligations," Sjahril told journalists after signing a $1 billion trade loan agreement with Japan's Exim Bank.
As a result of BI's intervention the rupiah rose to a day high of Rp 14,100 from a low of 16,200 in the morning, before closing at Rp 15,000.
The strengthening yen and the rupiah's reaction encouraged International Monetary Fund (IMF) Asia Pacific director Hubert Neiss to express optimism over the prospects of reaching the target rate of Rp 6,000 to the dollar set by the IMF and the government earlier this year.
Earlier this week, Neiss, who is heading an IMF review team to set new policy and budget outlines with the government, said the Rp 6,000 target exchange rate was unrealistic.
Nevertheless, Neiss said: "We cannot make any precise forecast. The exchange rate is what the market determines it to be."
The strengthening rupiah also gave a much needed boost to the stock market, stockbrokers said.
They said short-term foreign investors started buying certain valued stocks, especially export earners and dual-listed companies.
The head of research at Usaha Bersama Sekuritas, Baradita Katopo, said dollar-valued companies would continue to make gains in the future.
"Today all companies with dollar revenues like Indah Kiat gained ground, reflecting their true strength. Only Aneka Tambang shares remained flat. But I think it's only a matter of time before they too rise to reflect the companies strength," he said.
Baradita, however, warned: "The increase might not last for long because there are always profit takers."
Both pulp and paper firm PT Indah Kiat and state-controlled gold and nickel mining company PT Aneka Tambang export most of their produce.
Dual-listed firms like telecommunications giants PT Telkom and PT Indosat, and tin mining company PT Tambang Timah also made some gains.
Telkom rose Rp 200 to Rp 1,075, while Indosat jumped Rp 575 to Rp 16,600 rupiah. (rei/rid)