Rupiah 'still has leeway' to advance to 6,000 level<\/p>\n
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on
\nFriday that he was upbeat that the rupiah would still be able to
\nadvance to a level between 6,000 and 6,500 against the U.S.
\ndollar, despite the currency's retreat in the last two days.<\/p>\n
The central bank chief said he believed a stronger rupiah
\nwould not hurt the competitiveness of the country's exports and
\nsaid it would instead cut exporters's expenditure on imported-raw
\nmaterials.<\/p>\n
\"(Although) it is difficult to estimate an ideal level for the
\nrupiah-dollar rate, I believe the currency will still be able to
\nappreciate to 6,000 or 6,500,\" he told journalists following a
\nmeeting of the government's economic resilience council at the
\nState Guest House.<\/p>\n
The central bank governor said the rupiah was still
\nundervalued.<\/p>\n
His remarks follow a controversial statement made by
\nCoordinating Minister for Economy, Finance and Industry Ginandjar
\nKartasasmita on Wednesday.<\/p>\n
Ginandjar said the rupiah's ideal level against the dollar
\nshould be between 7,000 and 8,000 to maintain competitiveness of
\nthe country's exports.<\/p>\n
Sjahril said that a stronger rupiah would result in a
\nsignificant reduction in expenditure on imported raw materials,
\nwhich would in turn lower their overall production costs.<\/p>\n
\"At a level of between Rp 6,000 and Rp 6,500, exporters will
\nbe able to buy raw materials at cheaper prices,\" he said.<\/p>\n
The rupiah, which hit an eight month high of 7,150 against the
\ndollar on Wednesday, continued falling on Friday to close at
\n7,850. The fall has been partially attributed to the market's
\nnegative reaction to Ginandjar's statement.<\/p>\n
\"I think market sentiment on the rupiah is still negative so
\npeople will tend to buy more dollars from the market,\" a chief
\ndealer with a local private bank said.<\/p>\n
Dealers said that like other regional currencies, the rupiah
\nalso dropped as a result of a weakening in the Japanese yen
\nagainst the dollar. The yen closed lower at 119.12 against the
\nU.S. dollar after trading in Tokyo on Friday.<\/p>\n
Money market analysts said that dollar selling by state banks
\nin morning and afternoon trading prevented the rupiah from
\nbreaking through the 8,000 level.<\/p>\n
\"If there was no dollar selling by state banks, the rupiah
\nmight have broken through the 8,000 level,\" another dealer said.<\/p>\n
Bank Indonesia director Achyar Iljas said separately on Friday
\nthat the government would not intervene in the market to prop up
\nthe rupiah against the dollar.<\/p>\n
But Sjahril admitted on Friday that the central bank had sold
\ndollars over the past few days to buttress the rupiah's position.<\/p>\n
\"One day we sold $1 million, the next day about $5 million and
\nonce we sold $20 million,\" he said.<\/p>\n
Although the central bank remains optimistic about prospects
\nfor the rupiah, most currency dealers said that the outlook would
\nbe more bearish in the days ahead.<\/p>\n
They said prospects for the rupiah would remain bleak in the
\nrun-up to the special session of the People's Consultative
\nAssembly (MPR), which is scheduled for Nov. 10 to Nov. 13 this
\nyear.<\/p>\n
Like the rupiah, share prices in the Jakarta stock Exchange
\n(JSX) fell 1 percent on Friday, with the main price gauge
\ndropping 3.38 points to 313.45 on a total turnover of 167.84
\nmillion shares valued at Rp 233.16 billion.<\/p>\n
Head of research at Mashill Jaya Securities Edhi S. Widjojo
\nsaid the rupiah's decline had forced most investors to sell
\nstocks of corporations with large debts denominated in foreign
\ncurrencies.<\/p>\n
\"With a declining rupiah, companies will face greater
\ndifficulty servicing their debts ... so investors will be
\ninclined to sell,\" he said. (prb\/aly)<\/p>",
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