Indonesia on Guard Over Greek Default

BLOKBERITA -- Jakarta. Bank Indonesia, the country’s central bank, has vowed to guard the rupiah as concerns mount over a Greek debt default and put more pressure on the weakening currency.

The Indonesian Rupiah traded at 13,356 against the US dollar on Monday, down 0.1 percent from Friday trading, following a breakdown in debt negotiations between Greece and its European creditors over the weekend.

Greece will hold a referendum next Sunday on whether to accept the terms of a bailout plan put forward by international creditors, the result of which may determine the fate of the eurozone.

“The global economy is now connected, [the Greek debt crisis] must be affecting the local economy,” said Ronald Waas, Bank Indonesia deputy governor, on Monday.

“Bank Indonesia will guard the rupiah [against volatility].”

Although Ronald did not elaborate on exactly what measures the bank would take, he said the central bank would release an official plan detailing measures later this week.

Analysts say the the risk of default has triggered international investors to buy dollar denominated securities, further strengthening the greenback.

“Super dollar … is real,” said Eric Alexander Sugandi, an economist at Standard Chartered Bank on Monday. “US dollar is getting stronger against the euro and all other currencies in emerging markets.”

The Indonesian Rupiah has fallen 7.4 percent this year against the US dollar, in line with drop in exports in Indonesian commodities and slowing investment. A weaker rupiah would benefit companies that export, but manufacturers and local distributors will have to pay more for imported materials or machinery.

Tito Sulistio, the president director of Indonesian Stock Exchange, remained confident that the risk in Europe would hardly undermine local stocks.

The composite benchmark index fell 0.8 percent on Monday to 4,882.58, continuing last week’s decline. Foreign investors, which accounted for more than third of the day’s trading, sold Rp 398 billion more shares than they bought.

Tito said that the “unpredictable” political nature of the crisis contributed more to traders psyche than affected local companies’ stock values. “We believe that there are some good stock-picks in the local market.”

Bankers have said while the global financial market’s direct exposure to Greek debt is small, the debt default may have repercussions in other countries struggling with debt, such as Italy, Spain or Portugal. The fallout could also halt Europe’s tentative economic recovery.

Greek Referendum

EU chief executive Jean-Claude Juncker urged Greeks on Monday to back a cash-for-reform package rejected by their government, saying a ‘no’ vote in Sunday’s referendum would mean Greece was turning its back on the European Union.

Following a breakdown of talks between Athens and its creditors, Juncker delivered withering criticism of the Greek government which called the referendum and which advised Greeks to vote against creditor proposals.

“The whole planet would consider a Greek ‘no’ to the question posed … as meaning that Greece wants to distance itself from the euro zone and from Europe.” he told a news conference.

“I will say to the Greeks who I love deeply: you mustn’t commit suicide because you are afraid of death … You must vote yes, independently of the question asked.”

Juncker said he still believes a Greek exit from the euro zone was not an option, but cautioned that he alone could not necessarily protect Athens from other leaders who may disagree.

At a rare emergency news conference at the Brussels headquarters of his European Commission, Juncker ran through what he said was a fair offer made to Greece, which was socially more fair than the government had sought, effectively appealing over the head of Prime Minister Alexis Tsipras.

“Playing off one democracy against 18 others is not an attitude which is fitting for the great Greek nation,” Juncker said.

The Commission president said he felt deeply distressed and betrayed, believing until late on Friday that both sides were pushing towards a deal.

“Our sole concern has been to make a fair and balanced deal. This is certainly a demanding and comprehensive package, but it is a fair one … This is not a stupid austerity package,” he said. 

[ bin / reuters / Tjg ]