Rupiah off to 33-month high, heading for 8,000<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia (BI) said on Friday the rupiah could strengthen to
\nthe level of 8,000 per dollar provided there is further
\nencouraging news from the country's economic activities.<\/p>\n
BI senior deputy governor Anwar Nasution said that \"If exports
\nrun well, oil prices remain high and a successful IPO (initial
\npublic offering) of Bank Mandiri,\" the local currency has a good
\nchances of reaching that level.<\/p>\n
Anwar was commenting on the rupiah's strong showing recently
\ndue primarily to a slumping U.S. dollar against most currencies
\nin the world, coupled with increasing demands for the rupiah from
\nforeign investors wishing to invest in the country.<\/p>\n
On Friday, the local unit rose again to 8,275 per dollar, the
\nhighest level in the past 33 months, in what traders saw as the
\nlatest signs of more capital inflows here.<\/p>\n
However, while admitting that a stronger rupiah would help
\nsustain monetary stability, experts warned that it could also
\ncome at a price, especially when the appreciation takes place
\ndrastically.<\/p>\n
StanChart economist Fauzi Ichsan told The Jakarta Post that
\nthe most important thing at the moment was to strike a balance
\nbetween the good and the bad impacts of the rupiah's current
\nrally.<\/p>\n
\"The good side of it is that we can expect a low rate of
\ninflation as many of our goods are imported,\" Fauzi said, adding
\nthat high inflation would erode people's purchasing power.<\/p>\n
While people's buying power remains strong, he said, it would
\nprove beneficial for efforts to maintain the current strong
\ndomestic consumption, the main engine of the country's economic
\ngrowth.<\/p>\n
Moreover, a benign inflation could mean more leeway for the
\ncentral bank to cut its interest rate in an attempt to push
\nhigher bank lending to the corporate sector.<\/p>\n
But, the trend also has negative effects.<\/p>\n
\"Imagine an exporter who paid for imported raw material at Rp
\n9,000 per dollar four months ago, but then the firm has to
\nreceive payment for the products at an exchange rate of around Rp
\n8,200 or Rp 8,300.<\/p>\n
\"For export-oriented businessmen, the drastic change is not
\ngood,\" he said referring to the fact that most exporters here use
\nraw materials from overseas.<\/p>\n
The stronger rupiah does not only mean less earnings for
\nexporters, it could also erode the competitiveness of exporters'
\nin the global market, particularly when compared to exporters
\nfrom nations whose currency had not been as strong as the rupiah.<\/p>\n
Acknowledging these factors, Anwar said the central bank would
\ncarefully assess the rupiah's rising trend against the U.S.
\ndollar to find out at what level the trend would still be
\ntolerable.<\/p>",
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