Rupiah unable to retain gains, dollar strengthens
JAKARTA (JP): The rupiah failed to sustain its previous gains yesterday as the U.S. dollar strengthened against most Asian currencies and market concerns lingered over the country's prolonged debt hangover, currency dealers said.
They said the rupiah, which rose to as high as 7,450 to the U.S. dollar in early trading yesterday, weakened to 7,600/7,700 at the close of moderate trading.
The dealers said the country's latest accord with the International Monetary Fund (IMF) would not provide much more stimulus for the rupiah.
"After the IMF deal, investors are anxiously waiting for a final conclusion concerning the country's corporate overseas debts," a local bank chief dealer said.
Currency dealers said some investors remained confident that a significant number of overseas banks would approve a rollover plan for the country's overseas debts.
This would prompt overseas investors to remain bullish over the country's economic prospects, dealers said.
"But some investors are worried that other overseas lenders will not agree to roll over the country's corporate debts," the dealer said.
Talks on debts are scheduled to convene in New York today between Jakarta representatives and foreign creditors led by major American, Japanese and European banks.
The government announced in February that the country's private sector debt was worth US$68 billion as of the end of 1997.
The dealers said yesterday the central bank's plan to raise its short-term promissory notes (SBI) in the near future would not prop up the rupiah significantly.
"Market talk on the government plan to raise its SBI rates failed to strengthen the rupiah," the dealer said.
The dealers said the rupiah was expected to hover at its current level of 7,500 against the American dollar over the short term.
"But as soon as the central bank raises its SBI rates, we are confident we'll see the rupiah strengthen to a firmer level against the dollar," another dealer with a joint-venture bank said.
The currency dealers said trading activities in the currency market remained thin during the day as some overseas investors remained skeptical over the country's commitment to implement the IMF-brokered reform programs.
The rupiah's gains over the past week can be mostly attributed to growing hopes that the government would stick to reform commitments agreed to with the IMF, the dealers said.
As the rupiah slipped, stock prices on the Jakarta Stock Exchange (JSX) followed suit as most investors sold blue chip stocks in anticipation of higher bank interest rates, stockbrokers said.
They said investors were worried that Bank Indonesia would raise its short-term promissory notes (SBI) in the near future to prop up the rupiah.
"Trading activities remained modest because investors fear that the central bank will raise its SBI rates in the near future," a broker with a joint-venture securities firm said.
The central bank has repeatedly confirmed its commitment to impose monetary policies by setting high interest rates to stabilize the ailing rupiah.
The JSX Composite Index fell 7.91 points to 516.10 points yesterday with 376.46 million shares changing hands on the regular market worth Rp 456.16 billion ($60.81 million). (aly)