Investors await rupiah stability<\/p>\n
NEW YORK (Reuter): Indonesia's free-floating rupiah should
\nrebound on the strength of economic fundamentals in coming weeks,
\nbut volatility will deter foreign investors until then, U.S.
\nexperts said.<\/p>\n
"We may enter in when we feel the likelihood of a stable
\nexchange rate will increase," said Luis Luis, emerging market
\ndebt analyst at Scudder Stevens & Clark. "That will depend on
\ngetting more stability in Malaysia and Thailand."<\/p>\n
The rupiah declined more than 5 percent versus the dollar
\nafter the central bank removed its intervention band, abandoning
\nthe parameters under which the bank steps into the foreign
\nexchange market.<\/p>\n
The Indonesian unit fell from 2,637 per dollar to 2,815 before
\nreversing modestly to trade at 2,770\/2.800 at 1500 GMT. While the
\nrupiah remains supported by solid economic fundamentals, which
\ncompare favorably to other countries in the region, it appears
\nsusceptible to erosion in neighboring currencies such as the
\nbeleaguered Thai baht, Luis said.<\/p>\n
"We still have to look at Thailand as the critical question,"
\nhe said.<\/p>\n
Longer term rupiah stabilization will most likely arrive via
\nequity investment, a more-liquid market in the country, Luis
\nsaid. "As equity investors return to pick up bargains, we'll see
\nthe currency improve," he said.<\/p>\n
U.S. investors and analysts generally agreed the Indonesian
\ncentral bank acted wisely in floating the currency.<\/p>\n
Solid economic fundamentals should protect against protracted
\nrupiah weakness, and the economy should weather the inevitable
\ninterest rate hikes and slowed growth, said Thomas Trebat, head
\nof emerging markets research at Citicorp Securities.<\/p>\n
"It's a good move that allows them to protect their foreign
\nexchange reserves," Trebat said, adding that "it's going to
\nrequire the same types of painful adjustment that have been
\nfollowed to some degree in Malaysia, Thailand and the
\nPhilippines."<\/p>\n
The rupiah will likely further its losses in the days ahead,
\nand equity or debt investors will find more attractive levels for
\nre-entry into Indonesia, he said.<\/p>\n
Ashok Chabria, a senior foreign exchange trader at Australia
\nand New Zealand Banking Group, said Bank Indonesia's float caught
\nforex players by surprise.<\/p>\n
"The day before, they were defending (the rupiah). They had
\nalso raised rates," Chabria said. "I think they realized that
\nwithin the Asian currencies, there's nothing you can do -- it's
\njust wasting money defending the currency."<\/p>\n
Dollar\/rupiah slipped from its highs in mid-morning trading as
\ndealers bought rupiah and sold Singapore dollars, Chabria said.
\nSingapore's currency had held its value better than the other
\nsoutheast Asian units since the Thai crisis began, he said.<\/p>\n
"They're looking at crosses and saying ... the move in the
\n(rupiah) has already happened," Chabria said.<\/p>\n
But rupiah has most likely stabilized only for the near term,
\nsince the float apparently caught Indonesian corporates with
\nshort dollar positions, he said. "Any dips, you'll see dollar
\nbuying."<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/investors-await-rupiah-stability-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}