Despite denials by Indonesia's defense minister, rumors of President BJ Habibie's imminent resignation sent the country's currency and stock market into a nose-dive yesterday.
The talk was fueled by the East Timor crisis and a series of frantic government meetings the day before.
The Jakarta Post, in yesterday's edition, said Habibie ``did raise the issue'' of a resignation during a meeting with high-ranking officials on Wednesday.
In Auckland, host of this weekend's closely watched APEC summit, officials of the host government said the military had effectively stripped Habibie of much of his power.
The senior officials in the New Zealand Foreign Ministry, speaking on the condition of anonymity, said Indonesian Defense Minister Gen. Wiranto was pursuing his own agenda.
His recent actions indicate he has effective control in the government, and he will decide at some point whether he will stage a full military coup or a constitutional coup, the officials told The Associated Press in Auckland.
Despite the startling comments from New Zealand officials, Gen. Wiranto, who is also the armed forces commander, denied late Wednesday that Habibie had decided to quit.
Habibie is coming under intense criticism for his handling of the East Timor disaster, which has weakened his government and driven Indonesia to the brink of becoming a pariah nation.
The powerful military is furious with Habibie for allowing the East Timor referendum, which triggered a wave of violence across the impoverished territory.
In early trading yesterday, the rupiah dropped to 9,000 to the US dollar, losing 1,400 rupiah since Monday's trading.
The weak rupiah threatens the recovery of Indonesia's fragile economy and raises the dollar debt level of Indonesian companies.
``The market is very nervous. This is the only thing we're focusing on,'' the treasury chief at a foreign bank in Jakarta told Dow Jones Newswires.
Jakarta's stock market also plummeted 2.9 percent.
``The market is panicked and is selling all the big capitalization stocks,'' a dealer at a foreign bank told Dow Jones Newswires.
Habibie has already canceled plans to attend the APEC summit this weekend in New Zealand.
State Secretary Muladi, one of Habibie's closest advisers, was headed for a meeting with the MPR, the country's highest legislative body, yesterday.
The agenda was not disclosed, though he was expected to face questions about the government crisis.
Hundreds of students staged a rally outside the MPR building yesterday afternoon, as part of a renewed wave of anti-government protests.