Analysts upbeat about rupiah recovery<\/p>\n
SINGAPORE (Reuters): The accord Indonesia signed with the IMF
\nin June assumed that the rupiah would recover to 10,000 to the
\ndollar by the fourth quarter of this year, a target analysts
\nlabeled \"optimistic\" at the time.<\/p>\n
However, bumper amounts of dollars are rolling in and the
\nlatest developments from talks with international donors in Paris
\nlook like ending with another $6 to $8 billion heading for
\nIndonesia's coffers.<\/p>\n
Such a disbursement would come on top of a $6 billion IMF-led
\nlending package announced on July 16, which was itself in
\naddition to an original $41 billion package.<\/p>\n
Indonesia's Coordinating Minister of Economy, Finance and
\nIndustry Ginandjar Kartasasmita told journalists after a meeting
\nwith donors on Wednesday that the government would use most of
\nthe Paris cash to pay for central bank purchases of rupiah in the
\nforeign exchange market.<\/p>\n
He also said the rupiah's weakness was Indonesia's \"main
\nsource of problems\" and hoped the buying would boost the currency
\nby around 25 percent to about 10,000 per dollar by the end of the
\nfiscal year in March.<\/p>\n
On the face of it this might seem like a bad idea given that
\nbillions of dollars have in the past been wasted in trying to
\nsupport the rupiah, but the plan is actually doubly good, say
\nanalysts.<\/p>\n
The government will need to convert the dollars into rupiah
\nbecause the cash will finance infrastructure projects and
\nsubsidies for basic needs in Indonesia.<\/p>\n
The rupiah purchases are necessary and they will have the
\nadded benefit of supporting the beleaguered Indonesian currency.<\/p>\n
\"We are going to have some serious net inflows of dollars in
\nthe next few months, especially from the IMF,\" Daniel Lian, head
\nof Asian markets research at ANZ Investment Bank in Singapore,
\ntold Reuters Television.<\/p>\n
\"From a foreign reserve position the rupiah should actually
\nstrengthen and we have been making the call that the rupiah is a
\nfantastic buy at 15,000 and I think the rupiah will strengthen to
\nthe 10, 11, 12,000 level in the next six months.<\/p>\n
On Thursday the rupiah was at 13,000, having moved up steadily
\nfrom 15,000 per dollar earlier this month.<\/p>\n
And analysts say that the frantic dollar-buying spree that
\nbegan with the start of Asia's financial crisis a year ago and
\nslashed the value of the rupiah by 80 percent is tapering off.<\/p>\n
They say that while indebted corporates had been scrambling to
\nfind dollars to pay off loans that have been getting larger in
\nrupiah terms as the currency fell, they are not doing so now to
\nany great extent.<\/p>\n
Loans have been rescheduled so the dollar buying has slowed to
\na trickle.<\/p>\n
\"The major outflow you are going to see is the repayment of
\noutstanding foreign debt, but they have already rescheduled the
\nbanks and they have agreements on the trade finance side,\" said
\nChiang Yao Chye, head of Asia Pacific research at CIBC in
\nSingapore.<\/p>\n
\"There will be more detail in the coming months of what's
\nhappening with corporate debt so with that kind of a structure
\nthere is no reason for anyone to rush out to convert rupiah into
\ndollars to repay debt.\"<\/p>\n
Analysts also noted that with short-term money rates at over
\n50 percent in Indonesia there is good reason to be long of
\nrupiah.<\/p>\n
The IMF would seem to agree with the analysts and this week
\nsenior IMF official Hubert Neiss said an exchange rate of around
\n10,000 rupiah to the dollar was a \"reasonable assumption\" by the
\nend of the current fiscal year.<\/p>\n
\"I think this is still a reasonable assumption, or a possible
\nassumption, and... prospects are now more favorable for a
\nrecovery of the rupiah because there will be ample inflows of
\nforeign official money,\" Neiss told Reuters Television in an
\ninterview.<\/p>\n
Analysts said Indonesia could decouple from the rest of Asia
\nto some extent because the 80 percent depreciation of the rupiah
\nwas not in line with the 20-40 percent drops seen elsewhere.<\/p>\n
As long as Indonesia can get its runaway inflation under
\ncontrol -- year on year inflation was running at 60 percent in
\nJune -- there is no reason the rupiah cannot recover, analysts
\nsaid.<\/p>\n
But analysts did sound a note of caution and said the rupiah
\ncould start to sag again if economic conditions do not improve
\nenough to boost confidence among overseas investors so non-aid
\ndollars start to flow back into the country.<\/p>\n
The trade surplus should continue at a sizable level so
\ndollars will flow into Indonesia, but future inflows may not be
\nsufficient to offset any lack, or a slowdown, of further funding.<\/p>\n
\"The rupiah might start to come back again after the end of
\nthe fiscal year unless we have corresponding inflows by virtue of
\na recovery in confidence by overseas investors,\" CIBC's Yao Chye
\nsaid.<\/p>\n
\"That is something that remains to be seen.\"<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/analysts-upbeat-about-rupiah-recovery-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }