Posted 22 August 2005 @ 08:37
JAKARTA, 22 August 2005 - A Jakarta money changer. The Indonesian rupiah has weakened to again breach the 10,000-to-the-dollar level as traders sold off the currency amid fears the central bank would not keep up last week's aggressive defence of the currency.
The Indonesian rupiah has weakened to again breach the 10,000-to-the-dollar level as traders sold off the currency amid fears the central bank would not keep up last week's aggressive defence of the currency. The rupiah has been on a downward slide amid rising dollar demand for oil import financing as global oil prices skyrocket.
At 8:40 am (0140 GMT), the rupiah was at 10,005/10,015 against the dollar. On Friday, the rupiah closed at 9,985/9,995 to the dollar after briefly hitting the psychologically important level of 10,000, dealers said. "I think people must have learned from last Friday that Bank Indonesia is not that strong to guard the rupiah. That gives them some (boldness) to keep selling the rupiah," BNI treasury research head Hindria Listiady said.
"Psychologically, people got nervous and panicky after the rupiah broke the 10,000 level," he said, adding that the bank needs to take drastic moves just to signal that "the central bank is still there to defend the rupiah." The fall of the rupiah -- which last breached 10,000 in March 2002 -- highlighted the need to improve efficiency at oil and gas firm Pertamina, Listiady said.
"We need some kind of an explanation why oil imports keep rising when the economy is slowing down. Is it true that demand is picking up? It is a bit confusing," he said. Listiady predicted that technically the rupiah's next support level is at around 10,400 per dollar. Dealers said Bank Indonesia was seen in the market in early dealings but was not aggressively selling the dollar.
Economic affairs minister Aburizal Bakrie has warned that the central bank's intervention in the currency market would only be "temporarily" effective in curbing the rupiah's fall. Indonesia's economy is being dealt a double whammy by the higher oil prices, which are putting pressure on its currency as well as blowing out its domestic fuel subsidy budget.
Under the current fuel subsidy scheme the government sets fixed domestic fuel prices through a presidential decree and subsidises the market price difference. The government last raised fuel prices in March, sparking nationwide public protests and has launched a fuel saving campaign aimed at cutting nationwide fuel consumption by 5-10 percent.
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