Rupiah stabilizing<\/p>\n
The rupiah market has remained calm over the past few days
\nwith its rate stabilizing at a range of 2,900-3,000 to the U.S.
\ndollar. As the turbulence of the regional currency market is also
\ntapering off it is reasonable to expect firmer stability within
\nthe next few months.<\/p>\n
The reform package -- though its technical details are still
\nbeing finalized -- has been improving market sentiment and has
\nbeen effective in starting the process of regaining investor
\nconfidence.<\/p>\n
The latest developments seem to have made the central bank
\nmuch more confident about gradually easing the credit pinch, a
\nmove it promised last Wednesday when the government announced a
\nnew package of measures to cope with the currency turmoil.<\/p>\n
The gradual easing of the tight monetary policy which started
\nlast Thursday was stepped up on Tuesday when the central bank
\nagain lowered its benchmark interest rates (Bank Indonesia
\nCertificate rate) by between one and two percentage points.
\nThough the rates are still high, ranging from 12.75 percent to 21
\npercent for papers of less than one month maturity and 23 percent
\nfor three-month and 25 percent for one-month papers, the
\ndirection is clear.<\/p>\n
It is unreasonable to expect the monetary authorities to lower
\ninterest rates in a drastic manner as the market condition is
\nstill fragile and investors are still waiting for more concrete
\nand detailed actions under the new reform package.<\/p>\n
A Reuters poll of 12 analysts and foreign exchange dealers in
\nJakarta and Singapore early this week concluded that the rupiah
\nrate would most likely move between 2,900 and 3,000 to the dollar
\nuntil the end of this year.<\/p>\n
Barring another wave of currency turbulence in other Southeast
\nAsian countries, the 2,900-3,000 range predicted for the rupiah
\nrate may hold firm. The sooner the rupiah settles at its
\nequilibrium market rate, the better is for the economy as
\nbusinesses will be able to start price adjustments based on that
\nnew market range. Likewise, the government needs a more reliable
\nrate reference as it has to start preparing its 1998\/1999 budget
\nwhich has to be proposed to the House of Representatives in the
\nfirst week of January.<\/p>\n
Despite these encouraging developments, we cannot afford
\ncomplacency and think that everything is now back to normal. We
\nhave still to complete our homework as investor confidence has
\nnot fully recovered.<\/p>\n
The early process of regaining market confidence could be
\nsuddenly foiled if the government does not deliver what it
\npromised in the Sept.3 reform package or if the final agenda of
\nactions resulting from the package is seen as cosmetic.<\/p>\n
The government is challenged to maintain the process of
\nrestoring market confidence, especially in the run-up to the
\nPresidential election next March. It is not that political
\nstability is in danger. Far from it, Soeharto's reelection has
\nbeen ensured. But such a political agenda is usually full of
\nrumors and is sometimes marred by conflicting signals to the
\nmarket.<\/p>\n
It is therefore most imperative for the cabinet to come out
\nsoon with the set of concrete measures set forth in the package
\nand to refrain from giving confusing signals to the market while
\nthe final details of the reform measures are being prepared.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-stabilizing-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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