Rupiah surges further, share prices rise 10.7%

JAKARTA (JP): The rupiah surged to 8,200 against the U.S. dollar on Friday, sparking a 10.7 percent gain in share prices.

Currency dealers said the rupiah, like all regional currencies, was boosted by the unexpected U.S. interest rate cut.

"A lot of it has to do with the rate cut. The rupiah does not stand alone, it strengthens in tandem with the yen, the baht, the Singapore dollar and other regional currencies," a dealer with a local private bank said.

The rate cut sent the dollar retreating against major currencies, particularly the yen. The Japanese currency strengthened to a low of 115.45 against the dollar early Friday.

The rupiah opened at 8,650 against the U.S. dollar and shot up to 8,200 by the Jakarta trading close, a 5.7 percent rise from Thursday's close of 8,700 and its highest level since May 6.

The dealer said offshore operators, which had persistently built on long dollar position, continued to unload their dollars for rupiah to reduce their risks.

"Unlike in previous weeks when the strengthening of the rupiah was strongly related to state banks' dollar selling, today it was foreign operators which sold dollars. And I didn't see any dollar selling by state banks today," the dealer said.

Bank Indonesia Governor Sjahril Sabirin gave quite a different account of the strengthening of the rupiah, saying it was boosted more by foreign confidence in the country than by the rate cut.

"Maybe there is an impact (of the rate cut), but I think the current strengthening of the rupiah is strongly related to what we have been doing so far," Sjahril told journalists at the House of Representatives on Friday.

A dealer with another local private bank agreed and said investors' bullishness on the rupiah had built up in the past week.

The U.S. rate cut was just merely supplemented the already bullish mood in the local unit, he said.

The relatively stable domestic political situation also contributed to the bullish sentiment on the rupiah, he said.

"If this situation prevails, I believe the rupiah could easily break the 8,000 level."

Riding the strengthening rupiah, stock prices on the Jakarta Stock Exchange surged 10.7 percent, with the JSX Composite Index rising 32.74 points to close at 337.58.

Trading turnover totaled 384.95 million shares worth Rp 473.53 billion.

Stockbrokers and securities analysts said investors who flocked to the local market on Thursday were mostly motivated by the U.S. rate cut.

Anton Karlam, an analyst at Panin Securities, said the U.S. rate cut fueled speculation of an imminent rate reduction by central bankers in industrial nations and nations in crisis like Indonesia.

He said many investors bought dumped stocks of companies with large debts as the strengthening of the rupiah had increased the likelihood they would repay their offshore debts.

Most large-cap stocks gained ground, with state domestic telephone monopoly PT Telkom rising Rp 450 to close at Rp 2,275 on 43.5 million shares traded, while state-owned satellite operator Indosat climbed Rp 1,375 to Rp 8,325 on 3.34 million shares.

Cigarettemaker PT HM Sampoerna gained Rp 550 at Rp 3,350 on 13.93 million shares changing hands, while competitor PT Gudang Garam was up Rp 1,400 at Rp 8,450 on 2.43 million shares.

Car manufacturer PT Astra International was up Rp 75 at Rp 450 on 28.79 million shares, while state general mining firm PT Aneka Tambang was up Rp 125 at Rp 1,500 on 29 million shares. (rid)