Hopes high for peaceful election<\/p>\n
Dadan Wijaksana, Jakarta<\/p>\n
The rupiah, which climbed by 2.8 percent last week, is expected
\nto remain strong in this week's four days of trading,
\nparticularly if the Presidential election on Monday turns out as
\npeaceful as the campaigning went.<\/p>\n
An uneventful election day would add to the already bullish
\nmarket sentiment stemming from the limited impact of the
\nrecent hike in U.S. interest rate, said currency analyst Panji
\nIrawan.<\/p>\n
He added that Bank Indonesia's earlier measures to absorb
\nexcess liquidity in the banking sector had so far been effective
\nin curbing speculation against the local unit.<\/p>\n
\"With the Fed (U.S. Federal Reserve) raising its interest rate
\nby only 25 basis points, coupled with BI's recent moves, it's
\nmore expensive for banks to hold the dollar, so the market is now
\nin a rush to sell dollars and buy the rupiah.<\/p>\n
\"And with no significant problems so far during the elections,
\nit serves as evidence that earlier fears of disturbances were
\nbaseless -- something that can boost the sentiment in an even
\nmore positive way,\" Panji of Bank Mandiri, told The Jakarta Post.<\/p>\n
Last week, the rupiah closed at 9,150 per U.S. dollar, or up
\nby 2.8 percent from the previous week, supported by the lower-
\nthan-expected rise in the U.S. interest rates of 0.25 percentage
\npoints. There is also growing confidence that the presidential
\nelection process will continue to remain orderly.<\/p>\n
An increase of at least 0.50 percentage points had been
\npredicted before.<\/p>\n
The central bank also has played its part. Its policy to
\nincrease minimum reserve requirements for banks to between 6 and
\n8 percent, effective since July 1, has reduced excess liquidity
\nin the banking sector, which, in turn, has limited banks' ability
\nto speculate on currency.<\/p>\n
The local currency's reemergence last week was in stark
\ncontrast to previous weeks, which saw the rupiah hurt by
\nexpectations of an aggressive rate hike in the U.S. and political
\nconcerns at home ahead of the election.<\/p>\n
Should the voting day go smoothly as was expected, Panji said,
\nthe rupiah had a good chance of strengthening further to test the
\nlevel of 9,000.<\/p>\n
A dealer at a foreign bank shared Panji's optimism.<\/p>\n
\"It has been proven that the fears on the Fed and elections
\nwere unfounded, most people should have realized that by now.<\/p>\n
\"So, unless we see something wild on Monday, I think the
\nrupiah will strengthen and breach the 9,000 level this week,\" the
\ndealer told the post.<\/p>\n
In the stock market, the bullish sentiment would also prevail,
\na dealer said.<\/p>\n
The Jakarta Composite Index had a good chance of continuing
\nits rally, having gained more than 3 percent last week, also on
\nexpectations of peaceful elections.<\/p>\n
The index ended the week at 745.03 points, advancing by 3.4
\npercent from the week earlier on average daily volume of 1.26
\nbillion shares worth Rp 636.32 billion (US$67.8 million).<\/p>\n
\"With the lower-than-expected rate hike in the U.S., many
\ninvestors are shifting their investment from dollar-denominated
\nassets back to the stock market,\" she said.<\/p>\n
The local stock market will be closed on Monday due to
\nelection day.<\/p>",
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