Indonesian Rupiah Ends 3-Day Gain on Failure to Rise Past 9,000

By Patricia Lui

Aug. 7 (Bloomberg) -- Indonesia's rupiah fell, ending a three-day advance, after its failure to strengthen beyond 9,000 to the dollar encouraged traders to buy back the U.S. currency.

The rupiah has failed four times to rise above 9,000 per dollar in the past year, according to data compiled by Bloomberg. The currency climbed to 9,056 to the U.S. currency yesterday, its highest level in five months. The rupiah will trade at an average of 9,250 versus the dollar this year, the government forecast in its 2008 budget released to lawmakers on July 15.

``The rupiah's weakness is due to profit-taking as it neared the crucial dollar support level of 9,000,'' said Thomas Harr, a senior currency strategist at Standard Chartered Plc in Singapore. ``Historically, the central bank had this unofficial range of 9,000 to 9,500. Despite what it says about wanting a stronger currency to curb inflation, the market is very wary that they may not allow it to break the 9,000 level.''

The rupiah fell 0.4 percent to 9,117 per dollar at 9:50 a.m. in Jakarta, according to Bloomberg data. The currency gained for a third day yesterday after the central bank raised its benchmark interest rate a quarter-percentage point 9 percent the previous day.

The rupiah may strengthen past 9,000 per dollar in the coming week, Harr said. ``The market will still try to test 9,000 and also, they haven't been talking about the 9,000 to 9,500 band lately.''

The rupiah has risen 1.2 percent against the dollar since Bank Indonesia made the first of its four rate increases this year on May 6.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net.