Political woes continue to plague rupiah<\/p>\n
JAKARTA (JP): The rupiah is likely to continue to stay at the
\nRp 10,000 level against the U.S. dollar this week due to the lack
\nof fresh incentives that could lift the market sentiment,
\nanalysts have forecast.<\/p>\n
Currency analysts and dealers share the same view that the
\ngrowing concerns over the country's political and economic woes
\nwould continue to undermine the Indonesian currency.<\/p>\n
Farial Anwar, a currency analyst at a local securities company
\nsaid that with the current political instability, it would be
\ndifficult for the rupiah to return to its Rp 9,000 level.<\/p>\n
\"It's very difficult now to predict the rupiah's movement,\" he
\ntold The Jakarta Post on Saturday.<\/p>\n
But he was optimistic that although the situation remained
\nunfavorable, the rupiah would continue to maintain last week's
\nposition at a range of between Rp 10,300 and Rp 10,500 against
\nthe American greenback.<\/p>\n
The joint intervention scheme developed by Bank Indonesia and
\nthe government will prevent the currency from breaching the Rp
\n11,000 level again.<\/p>\n
On Monday, the rupiah briefly touched 11,500 after a senior
\nBank Indonesia official remarked that the central bank lacked in
\nforeign exchange capital to effectively intervene in the market.<\/p>\n
Bank Indonesia responded by selling dollars, and upping the
\nrate of its overnight promissory notes by 50 basis points to push
\nback the rupiah to 10,000.<\/p>\n
Upon the government's request, state firms joined the fray to
\nsave the rupiah by releasing their dollar reserves.<\/p>\n
However, Farial said that last week's concerted efforts by
\nBank Indonesia and the government failed to bring back the rupiah
\nto below the 10,000 level.<\/p>\n
\"Whenever the dollar got to the 9,000 level, corporations
\nimmediately stepped in to buy,\" he said.<\/p>\n
According to him, the market already knows that Bank
\nIndonesia's foreign exchange reserves is at a critical level.<\/p>\n
The central bank, he said, was now the main dollar supplier,
\ncoming largely from the exports of crude oil and loans from
\ninternational institutions.<\/p>\n
Yet dollar demand for serving foreign debts and importing raw
\nmaterial alone might reach around US$50 billion this year, he
\nsaid.<\/p>\n
\"And that doesn't include dollars for speculation,\" he added.<\/p>\n
With gross foreign exchange reserves of only $29 billion, he
\nsaid, Bank Indonesia's intervention capacity was highly
\nquestionable.<\/p>\n
Adding pressure to the meager foreign exchange reserves, is
\nthe uncertainty of a $400 million loan package from the
\nInternational Monetary Fund (IMF).<\/p>\n
\"The market is not hoping for the IMF's dollars ... but the
\nIMF has become a benchmark for gaining support from other foreign
\ndonors,\" Farial went on saying.<\/p>\n
The IMF has delayed its loan package since last December after
\nIndonesia lagged in implementing key economic reforms targets.<\/p>\n
Farial said that as other foreign donors had linked their
\nloans to Indonesia complying to the IMF's reforms target, the
\ninflow of the fresh loans was uncertain.<\/p>\n
He also suspected that the IMF's reluctance to disburse the
\nloan had more to do with the agency's concerns over the
\ngovernment's immediate future rather than with achieving any
\nreforms targets.<\/p>\n
\"It's not safe to channel the loans now if the public starts
\nhaving doubts over the current government's legitimacy,\" he
\nexplained.<\/p>\n
The IMF would never admit tying its loans with politics, he
\nsaid, but the Fund can't risk handing out $400 million to a
\ngovernment about to fall.<\/p>\n
\"Diplomatically it's unwise to say that your government is not
\ncredible anymore, so they (IMF) just keep picking on the LoI
\n(Letter of Intent),\" he said in reference to the LoI, which
\noutlines the reforms targets.<\/p>\n
When asked whether the market was trading on that worry, he
\nanswered: \"Look at the facts, watch the rupiah getting weaker.\"<\/p>\n
The rupiah did lose ground last week, closing Friday on 10,325
\nagainst the greenback from its previous week's closing at 10,090.<\/p>\n
Meanwhile, economist Dradjad Wibowo remained upbeat on
\nIndonesia's relation with the IMF.<\/p>\n
\"The Fund should be committed to channel its loans no matter
\nwho the president is,\" he said.<\/p>\n
Yet he noted that the rupiah breached the 10,000 level, after
\na statement by a senior government official that an IMF review
\nteam was due to come that week, failed to materialized.<\/p>\n
Dradjad said that the rupiah's recovery now partly hinges on
\ncertainty over the arrival of the IMF's review team; unless, he
\nadded, the government can dispel the political fog over this
\ncountry, which was unlikely in the near term.<\/p>\n
President Abdurrahman Wahid's grip on power was marked last
\nweek by the dismissal of a minister from the opposition party.<\/p>\n
The embattled President fired Minister of Forestry Nurmahmudi
\nIsmail, whose party is a part of Abdurrahman's staunchest
\npolitical foe, the Axis force.<\/p>\n
The weak rupiah took its toll on the stock market, with the
\nJakarta Stock Exchange (JSX) composite index dropping to below
\n400, which many believed had been the market's resistance level.<\/p>\n
Head of research at PT Ciptadana Securities, Eddy Widjoyo said
\nfears of companies suffering from more foreign exchange losses
\ntriggered across the board selling.<\/p>\n
Massive selling landed the JSX index at its lowest level in
\ntwo years, ending the week at 380.51 from its opening at 414.10.<\/p>\n
\"Those with no positions yet, maintain a wait-and-see stance,
\nwhile those with positions were cutting their losses,\" Eddy said.<\/p>\n
For this week, he estimated the rupiah's woes to still drag
\ndown the JSX composite index and leave it hovering at 375. (bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/political-woes-continue-to-plague-rupiah-1447893297",
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