Rupiah weakens slightly on imports demand

Rupiah weakens slightly on imports demand

Dow Jones, Jakarta

The rupiah slipped slightly against the greenback on Thursday in a day of slow trading punctuated by state oil and gas company Pertamina's dollar purchases, traders said.

The dollar closed at Rp 9,655, from its close on Wednesday at Rp 9,648.

"The trading is very slow now because there is not much demand flow from the customers...but the oil company still wants to buy dollars," a dealer at a foreign bank said.

Indonesian corporates traditionally pay their foreign currency denominated debts at end-month, prompting intense dollar purchases.

Pertamina is scrambling to comply with a government directive to increase its fuel reserves to cover consumption for 20 days from a current level of 12 days.

Traders linked the easing in the trading volume on Thursday to growing investor acceptance of new foreign exchange regulations announced last week.

Bank Indonesia will implement next month regulations that will restrict the amount of dollars banks can borrow from offshore counterparts without underlying transactions at $1 million. Previously, there was no cap on the amount.

Central bank officials have said that the move is aimed at reducing the amount of speculative offshore money coming into Indonesia, which can destabilize the exchange rate.

The announcement of the new rules prompted investor volatility that drove down the rupiah against the dollar earlier late last week and earlier this week.

"Today I think people are reconsidering and consolidating about what to do next," a trader said.

"I'm not saying everything has settled down completely...but I don't see an immediate need for investors to convert their rupiah proceeds into dollars."

Dealers expect the dollar to trade between Rp 9,630 and Rp 9,655 on Friday.

Meanwhile, Jakarta shares ended slightly higher as bargain hunters bought back a mixture of blue chips and second liners, following recent corrections, dealers said.

The Jakarta Stock Exchange's Composite Index closed up 0.2 percent, or 2.73 points, at 1,137.42. The index touched an intraday high of 1,146,59 before profit taking trimmed the gains.

Gainers led decliners 58 to 53 with 84 stocks unchanged. Volume traded was 958.5 million shares, worth Rp 1.2 trillion compared with 1.5 billion shares valued at Rp 1.4 trillion on Wednesday.

"Buying interest was not really strong today as most blue chips still look overbought," a dealer with a local securities firm said.

"We recommended that our clients take profit on rally."

Leading the market's rise was the nation's largest cigarette maker Gudang Garam, which rose 3.6 percent to Rp 12,950 after a recent slide sparked by concerns the government's plan to raise minimum cigarette retail prices would hurt Gudang Garam's cigarette sales.

State-run Bank Negara Indonesia (BNI) gained 3.9 percent to end at Rp 1,880. Its smaller sister Bank Rakyat Indonesia (BRI) edged up 0.9 percent to finish at Rp 2,875.

Gold and nickel miner Aneka Tambang rose 2.1 percent to Rp 2,450, with rupiah weakness expected to boost the company's exports revenues.

Telecommunications company Indosat was up 0.9 percent at Rp 5,600, but its rival Telkom dropped 1 percent to Rp 4,950 on continued profit taking.

Bank Mandiri was also hurt by profit taking, down 0.7 percent at Rp 1,510.

Dealers said they expect shares trade flat to lower on Friday as the market seeks fresh impetus. The local bourse is expected to look to Wall Street for direction.