Rupiah touches 15,000 against dollar

JAKARTA (JP): The rupiah sank again yesterday, breaking the 15,000 level against the U.S. dollar in moderate trading before rebounding slightly in the afternoon to end the trading day at 13,750.

The rupiah's close yesterday was 6 percent lower than Wednesday's close at 12,900.

Currency dealers attributed the rupiah's free fall to weak regional markets, persistent political problems at home and a sudden rising demand for dollars by domestic commercial banks.

They said market fear over the Japanese yen's continuing poor performance against the American dollar and a possible devaluation of the Chinese yuan helped drag down the rupiah.

Dealers also said Bank Indonesia's (BI) move requiring commercial banks to pay their interbank debt and trade finance arrears by yesterday also contributed to the weakening of the rupiah.

"There were so many factors that pushed the rupiah down further. But I think the yen's consecutive fall played a significant role in the collapse of the rupiah today (yesterday)," a chief dealer with a local private bank said.

BI Governor Sjahril Sabirin shared the viewpoint that the rupiah's sharp fall was mainly caused by the falling yen.

"The fall of the Japanese yen over the past few days forced the rupiah to fall. There is nothing much we can do at the moment. We can only hope that the overseas situation will improve," he told reporters after meeting with President B.J. Habibie at the Bina Graha presidential office yesterday.

BI director Miranda S. Goeltom said separately that if the yen and the yuan improved, "hopefully the rupiah will also improve".

She also said that the government fiscal year-end target of Rp 6,000 per dollar may no longer be realistic.

"If you look at the current situation, it seems difficult to achieve the target. But we don't know what kind of developments will happen next," she said.

Sjahril said the central bank would not cut its benchmark interest rates in the near future because it was concerned that such a step would further weaken the rupiah.

"We have no plans to lower interest rates at the moment since it would add pressure to the rupiah. I'm certain it would be a risk."

Sjahril said before meeting with International Monetary Fund officials that the central bank would not lower the rates only to increase them again to defend the weakening rupiah.

"It would look like we were making a zig-zag policy," Sjahril told journalists.

He said, however, that the central bank was not considering another rate increase in the near future because it believed such a move would no longer be effective in defending the battered rupiah.

The Indonesian Chamber of Commerce and Industry, the banking industry and several prominent economists have urged the central bank to abandon its high interest rate policy since it has failed to stabilize the ailing currency.

They also pointed out that the high interest rates had pummeled the business sector.

The rupiah's fall prompted equity investors to take arbitrage trading on stocks with dollar-valuation like telecommunications firm Telkom and Indosat and tin miner Tambang Timah, which together accounted for some 30 percent of total market capitalization.

Most other stocks, however, lost ground.

The Jakarta Stock Exchange (JSX) Composite Index closed 3.46 points lower at 411.544, off its intraday low of 403.13 points.

The head of Sales at Bahana Securities, Bruce Rolph, said the country's crippled financial market would continue to wither due to soaring inflation and a contraction in the gross domestic product.

"The overseas general view is that Indonesia is terrible, causing more offshore funds to get rid of the local market," he said.

He said the weakening rupiah would cause most listed companies in Indonesia to have problems in servicing their foreign debts. (prb/rei/aly)