Rupiah unable to retain gains, dollar strengthens

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)