Fears of worldwide recession, coupled with the chaotic regional stock markets, dragged down the rupiah Friday to its lowest level against the U.S. dollar since October 2005, while the local stock market slumped to its lowest since June 2006.

The rupiah dipped to a worrying pyschological level of 10,225 per dollar as against 9,985 on Thursday, with the central bank pledged to stay active in the foreign-exchange market even though it might not be able to prevent a storm wave from overwhelming its defenses.

Bank Indonesia (BI) governor Boediono said the weakening of the rupiah was to be expected as other currencies in the region were also experiencing similar distress due to the shakeup in the global financial sector.

"What is so special about the rupiah at Rp 10,000? We should not see it only against the dollar but against other currencies. Other currencies are also lower against the dollar," he said after Friday prayers.

Meanwhile, Bloomberg reported that Indonesia's 10-year bonds had dropped, encompassing the biggest global fluctuation in government debt markets on the day - Friday, as demand for emerging-market assets fell.

Benchmark yields climbed to the highest since at least 2003 as worsening financial turmoil inflicted damage on economies as far apart as South Korea, Iceland and Argentina.

Bloomberg reported the yield on the 9 percent note due in September 2018 jumped 1.07 percentage points to 16.89 percent, according to closing prices at the Inter Dealer Market Association.

The price dropped 3.7784, or Rp 37,784 per Rp 1 million face amount, to 62.6752. A basis point is a 0.01 percentage point.

Investors demanded 8.6 percentage points more than U.S. Treasury yields to buy emerging-market debt. The JPMorgan Chase & Co.'s EMBI+ Index shows the highest Indonesian bond premium since November 2002, according to Bloomberg.

The Jakarta Composite Index, meanwhile, nose-dived by 6.9 percent, or 92.34 points to 1,244.86 after tail-ending the falls in the regional bourses. Total trading volume was 2.37 billion shares worth Rp 1.5 trillion (US$150 million) as against 1.35 billion valued at Rp 1.4 trillion the day before.

Asian stocks were hammered with investors selling massively as they grew more pessimistic about a global recession, AFP reported.

Japan nose-dived by 9.60 percent, while Hong Kong plummeted 8.3 percent as concerns for the real economy spooked dealers, who decided to dump shares amidst the gloomy financial outlook.

Heavy falls were recorded across the region, with Seoul dropping 10.6 percent, while Singapore slid 8.33 percent. Sydney fared comparatively well, losing only 2.6 percent. Taipei gave up 3.19 percent, while Shanghai was only 1.92 percent lower, but Mumbai also dropped by almost 11 percent, AFP reported.

The stock market slowdown and drying up of banking liquidity may force mining firms to reduce their spending on exploration, causing commodity scarcity during the next four to five years, an official and a business association said on Wednesday.

Simon Felix Sembiring, the senior advisor for finance and economy at the Energy and Mineral Resources Ministry, said that firms would face difficulties in seeking financial resources from the market and banks for their expansion.

"The stock market has been a major financing source for mining firms to get cheap funds that are usually used for exploration investment," said Simon, who is the ministry's former director general of mining.

"Since we will not have an expansive exploration activity, there will be no new reserves discovered. As a result, there will be a shortage in mining commodities for the next four to five years that will eventually drive up the prices," he said.

The Indonesia Stock Exchange (IDX) has been haunted by the fear of global recession, losing 50 percent of its value since January this year.

Supriatna Suhala, the executive director for the Indonesian Coal Mining Association, said that havoc in other stock markets would exacerbate conditions for companies seeking funds from outside as well as for those seeking to invest in new mining projects and concerns.

The new comers cannot go public in Indonesia because the stock market regulation requires companies to gain profits for three consecutive years locally before selling their shares to the public, according to Supriatna.

"Most of the time, new and small coal producers form joint ventures with overseas firms so that they can be listed on the international bourse," he said.

Several companies providing mining construction services have even halted their operations.