Rupiah slides as importers buy dollars

JAKARTA: The Indonesian rupiah slid Wednesday as importers bought US dollars to pay month-end bills on a relatively quiet day when Singapore and Malaysian markets were closed for a holiday and investors waited for the outcome of the euro zone summit.

The rupiah has continued its slide since Monday but with limited losses as the central bank keeps intervening in afternoon sessions, albeit with less aggression than it did last month. Its foreign exchange reserves fell $10 billion in September.

Prospects for a comprehensive deal to resolve the euro zone debt crisis at a summit on Wednesday looks dim, with deep disagreement remaining on critical aspects of the potential agreement, including how to give the region's bailout fund greater firepower.

"Markets are waiting for the euro summit ... The rupiah weakens mostly on onshore corporates' month-end demand," said a foreign bank trader in Jakarta, adding the holidays in Singapore and Malaysia caused Asian sessions quiet.

A central bank official had said it would intervene only if there was strong volatility and it still saw the rupiah strengthening going forward.

Analysts in a Reuters poll expected the rupiah to stay near the current level at 8,823 per dollar by year-end.

Bank Indonesia has been spotted to intervene in afternoon sessions to keep the rupiah in check, traders said. But they are less aggressive than last month when hedge funds and mutual funds dumped the country's bonds, pressuring the currency.

Indonesian stocks and bonds were relatively steady on Wednesday on growing concerns that the outcome from a key meeting of European policymakers to contain the debt crisis may fall short of expectations.

In holiday-thinned trading volumes, dealers focused on technical chart supports for the dollar versus Asian currencies.

The US dollar bounced against the Singapore dollar from the 55-day moving average at S$1.2608 after three tries to break below the level.

Meanwhile traders were unable to push the US dollar below 1128.6 won, the 50 percent retracement of its August to October rise.

WON

Dollar/won traded at a moderate 1,128.2 to 1,133 range in Asia this morning, last at 1,131.5. The pair opened at 1,130 and bounced around directionless ahead of the euro zone summit.

Recent talk of expansion of swap agreements between China and South Korea is likely to come to fruition soon with the currency swap issued to be discussed at Wednesday's prime ministerial meeting.

Copyright Reuters, 2011