Rupiah's fluctuation within normal range: Dorodjatun

JAKARTA (JP): Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti played down on Thursday the weakness of the rupiah, saying that the local currency's fluctuation was still within normal limits.

"Fluctuation is quite normal. But we hope it won't exceed 10 percent," Dorodjatun said after a Cabinet meeting in Jakarta.

He said the rupiah's weakness was temporary due to the rising demand for dollars for debt servicing.

The rupiah fell to Rp 9,175 in thin trade on Wednesday compared with Rp 8,580 on Aug. 13, the highest point for about one year. The rupiah bounced back to Rp 8,925 on Thursday.

Dorodjatun also said the government would allow market forces to determine the rupiah's exchange rate.

A broker working with a joint venture company said some corporations delayed buying rupiah, thinking that the currency would strengthen further after the government signed the letter of intent with the International Monetary Fund.

"But their speculation turned out to be wrong," said the trader, adding that Wednesday was the deadline for those companies to pay their debts.

He expressed optimism that the rupiah would end stronger on Friday as demand for dollars had decreased significantly.

"I foresee the rupiah trading within the range of Rp 8,700 and Rp 8,900 on Friday," he said.

The broker said the rupiah would appreciate even stronger if the government could successfully restructure the country's ailing banking sector and privatize assets currently held by the Indonesian Bank Restructuring Agency (IBRA) as well as provide legal certainty to foreign investors already doing business in the country.

The dollar found little respite from news Wednesday that the U.S. economy had averted a recession in the second quarter.

Second-quarter U.S. gross domestic product grew at a revised 0.2 percent pace, the slowest in more than eight years. The second quarter was previously estimated at a 0.7 percent rate of growth. The revised figure was still better than economists' consensus expectation of zero growth; many had expected GDP to shrink.

Still, the dollar failed to make much headway against the yen, despite a sharper-than-expected fall in Japan's July industrial output -- which contracted by 2.8 percent -- and a continued slide in the benchmark Nikkei stock index to new 17-year lows, according to Dow Jones Newswires.

At 0845 GMT (3.45 p.m. Jakarta time), the dollar was quoted at 119.79 yen, below 120.14 yen late Wednesday in New York. The dollar was at 119.87 yen late Wednesday in Tokyo.

Against the Singapore dollar, the U.S. currency was at S$1.7471, down from S$1.7507 late Wednesday.

The yen's resilience and traditional month-end exporter dollar sales bolstered the New Taiwan dollar, although central bank purchases of the U.S. currency kept a rein on the local dollar's advance, dealers said.

The U.S. dollar closed at NT$34.582, down from NT$34.593 Wednesday.

Underperforming the yen, the South Korean won ended marginally weaker after trading in a narrow range, as Hynix Semiconductor Inc.'s precarious position continued to vex local financial markets after the chipmaker decided to withhold payment on 400 billion won of bonds that matured Monday.

The dollar finished at 1,283.7 won, slightly higher than Wednesday's close of 1,281.7 won.

On the Philippine Dealing System, dollar short-covering by banks weighed on the peso, which was uninspired by the country's stronger-than-expected economic growth in the second quarter, dealers said.

The dollar closed at 51.215 pesos, a touch higher than 51.190 pesos Wednesday.

The Thai currency was steady around 44.265 baht a dollar, compared with 44.255 baht late Wednesday. (03)