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)