BI expects stronger rupiah<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The rupiah, which has been on a weaker footing against the dollar
\nlately, will get a huge boost from the sale of US$1 billion in
\nglobal bonds, central bank governor Burhanuddin Abdullah said on
\nThursday.<\/p>\n
The flow of payments for the dollar-dominated bonds would hike
\nthe dollar supply in the local market and thus ease pressure on
\nthe local currency, he added.<\/p>\n
\"The inflow of funds is expected within the next five days,\"
\nBurhanuddin said on the sidelines of a discussion on the economy.<\/p>\n
In its first move since the crisis, the government has tapped
\nthe international debt market by launching the sovereign bond on
\nWednesday night. The bond carries a 10-year maturity profile and
\ngives investors a 6.85 percent return.<\/p>\n
The $1 billion bond issue is more than double the initially
\nplanned $400 million. The government decided to raise the amount
\nof bonds in view of huge demands from global investors, who had
\nsubmitted offers worth $4.16 billion.<\/p>\n
Burhanuddin did not mention as to how far the rupiah was
\nexpected to rise from the impact of the bond, but on Thursday,
\nthe positive sentiment from the sale was already apparent. The
\nrupiah closed at 8,545 per dollar, higher than the 8,560 closing
\nrate the day before -- the lowest in four months.<\/p>\n
The rupiah has been under pressure recently, falling victim to
\nthe dollar's renewed strength against top currencies in the
\nregion, including the Japanese yen.<\/p>\n
As the impacts from the bond issue would help secure the
\nrupiah's mid-term prospect, Burhanuddin was optimistic that
\ninflation would be lower this year than in 2003, and lower than
\nBank Indonesia's initial target for 2004.<\/p>\n
In 2003, Indonesia posted the lowest year-on-year inflation in
\nfour years at 5.06 percent. Bank Indonesia has forecast inflation
\nthis year at 5 percent, lower than the government's 6.5 percent
\nestimate in the 2004 state budget.<\/p>\n
Aside from the rupiah's solid showing, Burhanuddin pointed at
\nother contributing factors that would ease inflation, including a
\ncontrollable amount of money in circulation and estimated
\nsuccessful harvests, which would strengthen the supply of goods.<\/p>\n
A low inflation will limit damages to the people's purchasing
\npower, which is crucial to retaining a robust domestic
\nconsumption, the country's main engine for economic growth.<\/p>\n
It will also provide more leeway for the central bank to keep
\nlowering its one-month benchmark interest rate, which now stands
\nat 7.24 percent -- already an all-time low.<\/p>\n
However, some economists cast doubts on Bank Indonesia's
\nforecast, saying that the April general elections would
\nnegatively impact the year's performance of those monetary
\nindicators.<\/p>\n
Martin Panggabean, a Bank Mandiri economist, said in the
\nbank's economic outlook report the elections would hamper the
\nperformance of rupiah and inflation.<\/p>\n
Martin assumed that the rupiah would hover at an average of
\n8,800 per dollar this year, higher than the 8,600 target set out
\nin the 2004 budget, while annual inflation would level at 6.8
\npercent.<\/p>\n
The two factors would lead to a rise in Bank Indonesia's rate
\ntowards the year-ends to a range of 8.9-9.5 percent, Martin said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-expects-stronger-rupiah-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}