Rupiah's response satisfactory: Sjahril

Rupiah's response satisfactory: Sjahril

TOKYO (Dow Jones): The rupiah's response to Friday's increase
in interest rates on all maturities of Sertifikat Bank Indonesia
money market instruments was satisfactory, and the central bank
stands ready to adjust interest further if needed to stabilize
exchange rates, Bank Indonesia (BI) Governor Sjahril Sabirin said
yesterday.

Speaking in an interview with Dow Jones Newswires, Sjahril
said, "The main purpose of the rate increase was to prevent the
worsening of the rupiah's value. We would like to the dollar fall
below Rp 9,000, but at least further deterioration of the rupiah
was prevented."

The central bank raised the SBI rates Friday between four and
12 percentage points in its bid to support the rupiah.
Indonesian financial markets were closed for a holiday Monday,
but the announcement pushed the dollar lower to a close of
IDR9,187 Friday from Rp 9,650 Thursday.

Asked if he was satisfied with the rupiah's initial response
to Friday's rate move, Sjahril answered, "Yes."

Asked to comment on Indonesia's Coordinating Minister for
Economy, Finance and Industry Ginandjar Kartasasmita's prediction
earlier Monday that the rupiah would stabilize around Rp 6,000 to
the U.S. dollar by the first quarter of 1999, Sjahril said that
"it was very realistic to have the rupiah at Rp 6,000" to the
dollar.

He said the fall of the rupiah was a "problem of confidence"
and that before the news of the demonstrations he would have
expected the rupiah to rise further against the dollar to below
Rp 8,000, especially after the agreement with the International
Monetary Fund.

But the governor said the impact of the riots, which he said
the government had mostly contained, on the rupiah would be
temporary. The currency was trading around Rp 9,300 to the dollar
as he spoke.

As for support for the rupiah by the Bank of Japan by selling
dollars for rupiah, which occurred last autumn, he said he hadn't
raised the issue with the BOJ.

Sjahril said he didn't expect to discuss the topic during a
meeting Tuesday with the Japanese central bank chief, Masaru
Hayami, reiterating that restoring confidence in Indonesia was
more important than intervention. He described the planned
meeting as a courtesy call.

Nevertheless, asked whether intervention by the BOJ to support
the yen would help the rupiah, he said, "I can't say there's a
direct connection, but a stronger yen also will imply stronger
regional currencies vis-a-vis the dollar."

On the question of whether more financial institutions will be
closed, the governor said it depended on how successful their
restructuring was under the Indonesian Bank Restructuring Agency.

He said "there remains a possibility" that further financial
institutions may be suspended or closed and that the government
"may be able to conclude in a few months" whether such steps are
necessary.

But even if institutions are closed, he reiterated the
government's guarantee for all deposits until January 2000, when
the new deposit insurance corporation is expected to kick off.