European Debt Crisis Weakens Rupiah

JAKARTA, KOMPAS.com - The rupiah weakened against the dollar to a level of Rp8,700 on Wednesday on concerns about the continuing European debt crisis.

The Indonesian currency traded at Rp8,705 per dollar in the Jakarta interbank spot market late Wednesday, down 75 points from Rp8,630 per dollar the day before.

The European debt crisis that still showed no sign of abating led to capital outflows from the Indonesian share and bond markets, putting the local unit under pressure, money market observer Johanes Ginting of Monex Investindo Futures said on Wednesday.

"Since early August 2011, the foreign holding of Indonesian shares has continued to fall," he said.

The rupiah weakened on concerns about the European debt crisis and the US economic condition. The expectation of foreign players to release shares in the local equity market served as a negative factor for the rupiah, he said.

After all, the rupiah which currently traded at Rp8,700 per dollar was still stable due to the country’s positive economic fundamentals. Analyst Lana Soelistianingsih of Samuel Sekuritas said the external sentiment had a greater impact than the domestic condition on the rupiah’s exchange rate.

"The issue of Greece’s default will continue and become cause for major concern following the possible downgrade of three biggest French banks’ ratings by Moody’s due to their large holding of Greek bonds in their assets," she said.