Rupiah weakens in response peg and riots
Rupiah weakens in response peg and riots
JAKARTA (JP): The rupiah again crossed the 10,000 barrier
against the U.S. dollar yesterday on growing international
concern over a fixed exchange rate plan for the currency and
spreading riots.
Stockbrokers said share prices on the Jakarta Stock Exchange
(JSX) defied the rupiah's fall and rose 2.1 percent on selected
foreign buying of prospective shares.
Currency dealers said criticism from the International
Monetary Fund (IMF) and the U.S. on Indonesia's proposal to
proceed with a currency board system (CBS) caused the rupiah to
fall in early trading yesterday.
"The rupiah opened weaker after it was revealed over the
weekend that the IMF sent a letter to Soeharto saying it may
suspend further aid," a chief dealer with a joint-venture bank
said.
Spot rupiah opened at 9,500/10,000 yesterday, lower than last
week's close at 8,200, and continued to weaken to the day's low
of 10,700 by mid-morning. It rebounded slightly in the afternoon
and closed at 9,700/9,900.
The dealer said Singaporean operators, who bought massive
amounts of dollars in the morning, sold their dollars again for
rupiah later in the day on worries over the possible
implementation of a CBS.
"News of Indonesia planning to adopt the currency board system
plays a significant role in the currency market," he said.
Some currency dealers speculated that the rupiah would be
pegged at a fixed exchange rate of between 5,000 and 6,000 to the
dollar, a level they categorized as unrealistic and
unsustainable.
"The rupiah at that level would be costly and unsustainable in
a time of lost confidence in the economy, banking system and the
whole system," a chief dealer with a local private bank said.
State Minister of National Development Planning Ginandjar
Kartasasmita said yesterday that the government would consult the
IMF over its CBS plan.
Currency dealers said international concern over spreading
riots in the country also put more pressure on the rupiah.
They said the market was also hit by news that Minister of
Research and Technology B.J. Habibie looked set to be elected
vice president in March.
While the rupiah weakened, stock prices on the JSX rose 2.1
percent, with the composite index closing 9.15 points higher at
448.15.
The bourse's trading volume totaled 473.74 million shares
valued at Rp 842.59 billion (US$86.86 million).
Stockbrokers said that although the market outlook remained
bleak, bulk buying of safe-haven stocks like Telkom, Indosat and
Tambang Timah helped the benchmark price index rise yesterday.
"Today's rise was basically supported by the rise of certain
large-cap stocks due to arbitrage trading by foreign investors,"
said a broker with Trimegah Securities.
He said other blue chip stocks and second-line stocks remained
under selling pressure due to political tension and rising social
unrest in the country.
"The long-term prospect is still gloomy for the Indonesian
market. Most overseas investors put Indonesia in the lowest rank
of their investment preference," the head of research of Mashil
Jaya Securities, Tjandra Kartika, said.
Domestic telecommunications firm Telkom rose Rp 325 to Rp
3,525 yesterday, while satellite operator Indosat gained Rp 1,800
to Rp 13,800.
Cigarette maker Sampoerna dropped Rp 400 to Rp 5,100, while
competitor Gudang Garam fell Rp 325 to Rp 9,100.
Bank Internasional Indonesia rose Rp 25 to Rp 525, Bank Negara
Indonesia slipped Rp 25 to Rp 525 and Bank Dagang Nasional
Indonesia gained Rp 25 to Rp 300. (aly)