State banks bolster weak rupiah

State banks bolster weak rupiah

JAKARTA (JP): The rupiah remained under pressure on Thursday,
breaking through the 9,000 barrier against the U.S. dollar before
bouncing back to close the day at 8,600 after massive
intervention by state banks.

Financial analysts said that fears of political chaos ahead of
the special session of the People's Consultative Assembly (MPR)
next week remained the key factor in the rupiah's downturn.

The rupiah broke the 9,000 barrier in morning trade and
reached an intraday low of 9,200 against the dollar before
massive intervention by state banks in the afternoon reversed the
trend and brought the currency back to the 8,000 level, dealers
said.

At the close of the day's trading, the rupiah was at 8,600
against the U.S. dollar, slightly firmer compared to Wednesday's
closing rate of 8,800.

"Offshore market participants, especially from Singapore,
reversed their long dollar positions after several state banks
actively sold the dollar for the rupiah. This helped the rupiah
to recover," a chief dealer with a local private bank said.

The dealer said that most foreign operators also profits
on the gains they made when they bought dollars at 7,100 and
7,400 in the previous week.

The rupiah, which hit a record low of 17,000 against the U.S.
dollar in January, managed to stay in a range of between 7,000
and 8,000 against the dollar in the first three weeks of last
month.

But growing antigovernment protests in the run-up to the MPR's
Special Session, which money market players fear could lead to
violence, have halted the recovery.

Bank Indonesia Governor Sjahril Sabirin reiterated on Thursday
that the central bank was prepared to intervene in the market to
prevent the rupiah from declining further before and after the
four-day session.

He acknowledged that the fears of overseas operators could
bring more pressure to bear on the rupiah in the coming days.

Analysts have warned that dissatisfaction with President B.J.
Habibie's government and its failure to lead Indonesia out of the
economic crisis could spark a wave of violence similar to that
which engulfed the country in May and led to the resignation of
former president Soeharto.

Analysts said that a renewed outbreak of violence could force
the rupiah below the 10,000 level.

Unlike the rupiah, share prices made impressive gains on
Thursday, surging by 7.6 percent despite the political worries.

The Jakarta Stock Exchange (JSX) Composite Price Index soared
25.07 points to 355.52, with 565.35 million shares worth Rp
839.90 billion (US$97.66 million) changing hands in active
trading.

The head of research at Vickers Ballas Tamara, Noraya
Soewarno, said that although some investors were still concerned
with the possibility of social and political unrest, they had
seen buying opportunities in the local market.

An institutional sales broker with Trimegah Securindolestari
said that foreign brokerage firms such as Credit Lyonnais
Capital, ING Barings, Jardine Fleming Nusantara and SBC Warburg
had placed huge buying orders on most big-capitalized stocks
ahead of the Special Session. (aly)