The rupiah has weakened again for the seventh straight week, prompting the government to search for new ways to stabilize the volatile currency.
The currency depreciated past Rp 12,000 per dollar for the ninth day in a row on Friday, on what analysts said was concern that global funds were continuing to dump emerging-market assets amid the deepening global recession.
On Friday, according to data compiled by Bloomberg, the rupiah plunged to Rp 12,100 per dollar at 1:09 p.m. in Jakarta, before stabilizing at Rp 11,980 just after 4 p.m. The currency has fallen 4.7 percent this month, the second-biggest drop among Asia's 10 most-traded currencies excluding the yen.
Non-deliverable forwards contracts signal traders are now betting the rupiah will weaken 2.8 percent to Rp 12,350 per dollar in a month, compared with expectations for a rate of Rp 12,315 on Thursday.
Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.
"The [weakening] appears to be driven by capital flows, as we have seen no substantial deterioration in the trade surplus thus far," said Helmi Arman, an economist at PT Bank Danamon Tbk.
"We think the rupiah may remain under pressure until first half this year, particularly if worsening external conditions generate further concern over global deleveraging."
Juniman, an economist with PT Bank Internasional Indonesia Tbk, said thin trading volumes on the Indonesia Stock Exchange, or IDX, showed that foreign investors were not yet interested in emerging-market stocks.
The Jakarta Composite Index has dropped 4.8 percent this year as overseas investors sold more Indonesian shares than they bought. But Juniman said some foreign investors were still holding Indonesian government bonds due to their high yield spreads.
Bank Indonesia has been trying to stem the currency volatility by intervening in the currency market through foreign-exchange transactions. This has triggered a sharp drop in the country's currency reserves, which stood at $50.9 billion at the end of January, down from $60.6 billion six months earlier.
Boediono, the BI governor, said this week that Indonesia's foreign reserves would soon increase due to the foreign bonds the government recently issued, along with other foreign loans. The government has sold $2 billion of 10-year notes with yields of 11.75 percent and $1 billion of five-year notes with yields of 10.5 percent. The government this year also plans to issue yen-denominated bonds to Japan, or Samurai bonds, as well as international Islamic bonds.
The country signed bilateral currency-swap agreements worth $12 billion with Japan on Sunday to serve as a second-line defense if the rupiah slides further.
Meanwhile, the State-Owned Enterprises Ministry called a meeting of the 20 biggest state-run firms on Thursday to discuss their dollar exposure. State-Owned Enterprises Minister Sofyan Djalil ordered the companies to report their rupiah holdings to ensure they were not causing the currency to weaken. "We want to see the extent of their dollars exposure. We expect all of the reports by Monday," Sofyan said.
There has been speculation that SOEs have been buying up dollars recently to protect them selves from currency fluctuations. Sofyan said dollar exposure could be impacting the availability of the currency in the country and the ability of the central bank to stabilize the rupiah.
State oil and gas producer PT Pertamina reportedly bought between $100 million and $150 million of the US currency per day over the past month, to be used to buy gasoline on the international spot market.
Airline PT Garuda Indonesia also uses dollars to maintain and lease aircraft and buy aviation fuel. (Bloomberg, JG)