The Hang Seng Index closed at less than the key 10,000-point level for the first time since January 27 as Indonesian unrest fears mounted and erroneous reports of yuan devaluation sapped confidence, brokers said. Led by a rupiah slump, currencies and share prices in most regional centres also retreated, with the situation inside Indonesia remaining tense, they said. As interbank rates jumped, the blue-chip measure dropped 1.35 per cent to 9,971.93, its fourth consecutive fall, taking losses this week to 5.6 per cent. 'There is uncertainty in the region, reports of more casualties in Indonesia, rubber bullets, tanks on the street,' Prudential Portfolio fund manager Andrew Look said. 'It's difficult to predict [where markets are heading], people will tend to hold back under these circumstances.' Turnover was $6.69 billion, compared with the $8.19 daily average over the past year. Medan - the Sumatran city which has seen some of the most intense protests and violence this week - was relatively calm yesterday. Reports said troops were patrolling the streets. Credit Suisse First Boston assistant vice-president Denny Goenawan said: 'It's probably some of the worst [unrest] in the history of the country. 'But I don't think that it's going to change the political system any time soon.' Local interbank rates took off in morning trade on reports that a senior official from the People's Bank of China had highlighted growing pressure on Beijing to devalue the yuan. The reports were later denied, helping the Hang Seng index and other markets around the region pare the day's losses. State Street managing director Fred Au said: '[The yuan talk] started on Wednesday and really hit this morning . . . It was like putting oil on a fire.' Brokers said the share market's losses were also trimmed as dealers moved to cover short positions. Tai Fook Securities director Lennon Chan Wing-luk said: 'The denial is why Hong Kong came back a bit, plus some position-squaring. Everybody is shorting the market, so you need to cover in the afternoon. The market still is very bearish.' Morgan Stanley Dean Witter economist Andy Xie said the unrest in Indonesia took its toll on Japan - a big creditor to the country - and that in turn hurt sentiment in other regional markets. The Nikkei-225 Index dipped 0.66 per cent to 15,143.03. Growing evidence that economic growth on the mainland and in Hong Kong may be slower than expected has also increased investor caution. 'The market has come to accept the reality that economically Hong Kong and China are very slow and the economic pain is just beginning,' Mr Xie said. Brokers also pointed to fears that the US Federal Reserve may raise interest rates when policy-makers meet on May 19 as contributing to the bearish mood. One-month interbank rates rose most steeply, climbing 87.5 basis points to 7 per cent, while the benchmark three month-rate gained 56.3 basis points to 7.188 per cent. Traders said the rates' surge was also prompted by short-covering by banks, which had borrowed short-term funds to finance longer-term assets during the past four weeks, when the yield curve remained steep. They saw no signs of speculation on the Hong Kong dollar spot market, but Hong Kong dollar futures weakened. As interest rates rose, property stocks suffered. The property sub-index shed 1.69 per cent to close at 12,477.51 points. Mr Look said the market would trade in a range between 9,000 and 12,000 points over the coming weeks, which would offer enough value to re-ignite investor interest. Around the region, share markets fell in Singapore, Manila and Taiwan. There were gains in Jakarta on rupiah-related arbitrage trading, and in Kuala Lumpur. Brokers said the mood remained grim. 'It's Murphy's law - it's all been going wrong recently,' Mr Au said.