Rupiah weakens slightly as stocks decline
JAKARTA (JP): The rupiah weakened again yesterday on fears that recent riots in towns in Java and Sulawesi would spread to other major towns in the country.
The rupiah, which burst upward to below 9,000 against the U.S. dollar Wednesday, lost footing to close at 9,400/9,700.
Currency dealers said that if the riots spread to major cities, the country's ailing economy would worsen.
"This will in turn impact on confidence in the future of the rupiah," one of the dealers said.
Spiraling increases in the prices of essential goods have prompted unrest in several towns in East Java and Sulawesi.
Analysts say they fear the economic crisis, which has caused the layoffs of millions of people, would further fuel social unrest especially before the presidential election in March.
Members of the People's Consultative Assembly will convene here from March 1 to 11 to elect a new president.
President Soeharto is expected to return to office for a seventh consecutive five-year term amid calls for him to step down.
Troops were seen yesterday staging a security exercise at the House of Representatives yesterday to prepare for next month's election.
Sources said a similar exercise would be held today and tomorrow.
As the rupiah weakened, stock prices on the Jakarta Stock Exchange (JSX) slid 1.2 percent yesterday on another round of profit-taking after sharp gains Monday.
"Investors, who have made massive buys of blue-chip stock at the beginning of this week, are taking profits on fears of a strengthening rupiah," a broker with Trimegah Securities said.
The JSX Composite index closed 6.44 points lower to 513.48 yesterday from 519.92 the previous day.
Over 680.78 million shares changed hands on the regular market valued at Rp 752.97 billion (US$79.26 million).
Securities analysts said foreign investors would cash out before any there was any further weakness in the rupiah against the dollar.
"I don't think there have been any major changes in the economic fundamentals. People are still cautious about the long term prospects of the country's economy," an analyst from a joint venture securities firm said.
Securities analysts said the market expected more bad news in the coming weeks as political and social unrest spread due to escalating prices ahead of the presidential and vice presidential election in March.
"Political stability is an important factor for most foreign investors investing in a country. They will not stay long unless they are sure of the country's political stability," the analyst said. (aly)