Rupiah weakens again despite joint intervention

Rupiah weakens again despite joint intervention

JAKARTA (JP): The Indonesian rupiah weakened again on Friday
despite joint intervention launched by Bank Indonesia (BI) and
state-owned companies.

Foreign exchange dealers said on Friday that combined dollar
selling by the central bank and state companies failed to impress
the market due to worries over the worsening of the country's
political conflicts.

Although underlying dollar demand was thin, the market kept
attacking the local currency to scoop the dollar before it got
stronger, a dealer at a Singapore joint venture bank said.

He said that dollar selling by state firms had been too small
to absorb the high dollar demand triggered by political concerns.

"As the weekend is nearing, they (companies) don't want to be
short in dollars," he said.

The rupiah has been bearish since January, as doubt looms over
President Abdurrahman Wahid's future.

Persistent worries that political bickering could reach the
grass-roots level have blocked the rupiah's way up.

Confirming market fears, President Wahid's supporters
threatened on Friday to storm Jakarta if his political opponents
try to unseat him.

The rupiah's past three days of progress ended on Friday, when
it closed trading lower at 10,325 to the U.S. dollar, from its
Thursday closing position of 10,060.

Backing the rupiah's performance had been a collaboration
between the government and the central bank.

On Tuesday, the government said it would resort to "concerted
efforts" with BI to fortify the beleaguered rupiah.

Later several state firms announced that they had sold some of
their dollar reserves at the government's request.

Among those who have sold dollars are state airline PT Garuda
Indonesia, and two airport operators PT Angkasa Pura I and PT
Angkasa Pura II.

Coordinating Minister for the Economy Rizal Ramli told a media
conference that state firms would continue to sell their dollars
in a bid to shore up dollar supply.

But according to a dealer, only the Indonesian Bank
Restructuring Agency (IBRA) is capable of pouring much-needed
dollar supply into the market.

He said that recent dollar earnings from sales of IBRA assets
might yet have to be converted into rupiah.

Among IBRA's largest deals most recently is the sale of the
Salim Business Group's former palm oil plantations to a Malaysian
palm oil company.

The deal was worth US$368 million, and thus far it is unclear
whether IBRA has already sold the dollars in the market.

"IBRA may have about $1 billion in sales proceeds still in
dollars," he added.

Since the rupiah fell to an intraday low of 11,500 on Monday,
BI is also reported to have directly intervened in the foreign
exchange markets.

"On Friday morning BI was very aggressive, the moment the
market opened they moved in," the dealer said.

But he added that BI lost steam during the subsequent trading
hours.

"We expected that they (BI) would defend the rupiah at 10,200,
but nothing happened; they allowed the rupiah to slip away," he
said.

Separately, BI Governor Sjahril Sabirin reassured an unnamed
foreign bank that BI's penalty against it could be revoked, if
the bank proved it had not breached the central bank's foreign
exchange ruling.

"If the bank can show us convincing documents, we'll be happy
to revoke the penalty," he said.

British-based Standard Chartered Bank said on Thursday it had
received a BI letter referring to penalties against it over three
transactions made last month.

News website Detik.com quoted BI deputy governor Miranda
Goeltom as saying that the penalty amounted to US$900,000, or 30
percent of the transaction value. (bkm)