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)