Rupiah strengthens to new eight-month high<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The rupiah closed higher at Rp 8,960 to the U.S. dollar on
\nThursday, making it the first time the local currency had crossed
\nthe psychologically important boundary of Rp 9,000 since
\nSeptember last year.<\/p>\n
Traders said state-owned banks were aggressively selling
\ndollars as the U.S. greenback also lost strength against the yen
\nand other regional currencies.<\/p>\n
The dollar was trading late on Thursday at 124.00 yen, down
\nfrom 124.21 yen late Wednesday, Dow Jones said.<\/p>\n
The rupiah was quoted at Rp 9,055 on Wednesday.<\/p>\n
Currency analyst Farial Anwar of PT Currency Management Group
\nsaid that positive sentiment created by progress in the
\nimplementation of the country's key economic reform program had
\ncontinued to drive the rupiah's value up.<\/p>\n
\"The positive sentiment has prevailed until now,\" he told The
\nJakarta Post.<\/p>\n
The rupiah has been strengthening since the beginning of the
\nyear. The local currency received a major boost after the
\ngovernment completed the sale of its majority stake in the giant
\nretail bank, Bank Central Asia (BCA), in March, and obtained a
\nsovereign debt rescheduling approval from the Paris Club of
\ncreditor nations in April.<\/p>\n
Farial said that the rupiah would continue to appreciate in
\nthe short term.<\/p>\n
\"The rupiah could still be hovering in the range of Rp 8,800
\nto Rp 9,000 until the end of June, provided there is no bad
\nnews,\" he said.<\/p>\n
A stronger rupiah is crucial to help the country resolve its
\nvarious economic problems, including curbing inflation, reducing
\nthe high interest rate environment and easing pressure on the
\nstate budget to cover the interest rate of huge government bonds
\nissued to bailout banks.<\/p>\n
The current state budget assumes an average exchange rate of
\nRp 9,000.<\/p>\n
But many analysts said that the local currency was capable of
\nplummeting to the Rp 10,000 level again because of the country's
\nhuge foreign debt burden.<\/p>\n
Any signs of the government backtracking on its promised
\neconomic reform programs, analysts said, could also easily erode
\nthe enthusiasm surrounding the rupiah.<\/p>\n
Meanwhile, Vice President Hamzah Haz said on Thursday it was
\nmost important that there was not a quick appreciation of the
\nlocal currency, but a stable exchange rate to help provide
\ncertainty for businesses and the government.<\/p>\n
\"What is important for us is to maintain the stability (of the
\nexchange rate),\" he told Antara.<\/p>\n
He said that the ideal level of the exchange rate of the
\nrupiah was between Rp 8,000 and Rp 9,000.<\/p>\n
\"If it quickly strengthens to the Rp 8,000 level, we'll be
\nworried because it would make the economy unstable,\" Hamzah said.<\/p>\n
He added that to maintain the current positive sentiment in
\nthe rupiah, other economic indicators, such as inflation and
\nexports, had to be improved, and a reform commitment made with
\nthe International Monetary Fund (IMF) must be implemented.<\/p>\n
Separately, former coordinating minister for the economy Rizal
\nRamli said the positive sentiment in the rupiah was attributed to
\nthe strengthening of other regional currencies against the dollar
\nand the expectation of dollar inflow from the sale of state
\nassets.<\/p>\n
He added that the relatively stable political condition under
\nPresident Megawati Soekarnoputri was also a significant factor.<\/p>\n
But he warned against becoming overconfident with the rupiah
\nbecause there had been no significant change in the fundamental
\ncondition of the economy, with its sluggish export performance
\nand lower-than-expected first quarter economic growth.<\/p>",
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"sponsor": "Okusi Associates",
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