Rupiah woes may last longer, BI undeterred<\/p>\n
Rendi A. Witular, Jakarta<\/p>\n
While acknowledging that the rupiah's woes may last longer due
\nto the global uncertainties at present, the central bank remains
\nconfident that it will eventually stabilize as the country's
\neconomic fundamentals remain strong.<\/p>\n
Bank Indonesia deputy governor Anwar Nasution said on Friday
\nthat once the uncertainties abated, the rupiah would return to
\nits \"comfort level\" of between Rp 8,300 and Rp 8,700 against the
\nU.S. dollar. It closed on Friday at Rp 9,065.<\/p>\n
\"Inflation remains under control, our banking industry is also
\nimproving, and our foreign exchange reserves are sufficient to
\nhelp support the rupiah. So what are we afraid of?\" Anwar said
\nduring a weekly press conference.<\/p>\n
\"It is just a temporary decline, other countries are also
\nsuffering from the same problem. It is just the global sentiment,
\nand it will gradually abate,\" he added.<\/p>\n
He said that there was no reason for the central bank to
\nincrease its benchmark interest rate despite the falling rupiah
\nand a planned hike in the U.S. rate.<\/p>\n
He pointed out that the real interest rate level of around 2
\npercent at home was still relatively higher than the rates
\noverseas.<\/p>\n
Such a competitive rate means that there is actually room for
\na further cut in domestic interest rate, he added.<\/p>\n
The real interest rate figure is obtained by subtracting the
\ncurrent Bank Indonesia one-month benchmark interest rate of 7.32
\npercent from the annual inflation level of more than 5 percent.<\/p>\n
\"It must have been a stupid move by investors to pull out
\ntheir money from Indonesia, or to convert their rupiah-
\ndenominated assets to dollar-denominated ones, since our real
\ninterest rates are more competitive than those of other
\ncountries,\" said Anwar.<\/p>\n
The rupiah has lost more than 4 percent against the dollar
\nsince the beginning of this month due to a combination of
\nexternal factors such as a possible hike in the U.S. interest
\nrate, surging oil prices and a possible sharp economic slowdown
\nin China as it struggles to tighten controls on its rapidly
\nexpanding economy. On the domestic front, political uncertainty
\nleading up to the upcoming presidential election has also created
\npressure on rupiah.<\/p>\n
BI has placed the blame on four international banks based
\nhere, which have allegedly used the market's weak sentiment to
\nspeculate against the rupiah, driving the unit to its 14-month
\nlow recently. BI last week issued warning letters to the four
\nbanks over the practices.<\/p>\n
Although unconfirmed, several local newspapers have reported
\nthat the four banks are Standard Chartered Bank, ABN Amro,
\nDeutsche Bank and JP Morgan.<\/p>\n
Anwar said that the warning letters were not against the free-
\nflow of foreign exchange policy, since the central bank had the
\nobligation to control the rupiah from fluctuating sharply, a
\ncondition which would disturb the country's overall economy.<\/p>\n
\"The four banks are now still in the process of investigation.
\nThe central bank has the authority to stabilize the rupiah so
\nthat it will not go up and down drastically like a fever,\" he
\nsaid.<\/p>\n
Ruster<\/p>\n
;JP;REN;
\nANPAf..r..
\nStock-rupiah-market
\nJP\/ \/<\/p>\n
Stock ends higher, rupiah slumps<\/p>\n
The Jakarta stock market rose by 2.57 percent on Friday for
\nthe third straight trading session on bargain hunting in some
\nshares and subsiding concern over interest rate hikes in the
\nUnited States.<\/p>\n
The Jakarta Stock Composite Index ended 18.135 points higher
\nat 724.932 on volume of 1.09 billion shares worth Rp 1.08
\ntrillion (US$120 million).<\/p>\n
State-run telecommunications firm PT Telkom led the rally in
\nbluechips as it ended higher by Rp 150 to Rp 7,500. Its rival PT
\nIndosat was also up by Rp 225 to Rp 3,800.<\/p>\n
Cigarette producer PT Gudang Garam gained Rp 400 to Rp 13,650,
\nits rival PT Sampoerna also surged by Rp 150 to Rp 5,000.
\nAutomotive kingpin PT Astra International ended higher by Rp 100
\nto Rp 5,800, and Bank Mandiri was up Rp 50 to Rp 1,250.<\/p>\n
Analysts said that foreign investors made up more than 50
\npercent of the transactions, as many stocks were already
\nconsidered cheap following massive losses last week.<\/p>\n
Elsewhere, the rupiah failed to track the gains in the stock
\nmarket, as it closed lower again to Rp 9,065 per U.S. dollar from
\nRp 9,050 on Wednesday.<\/p>\n
Analysts said the decline was mostly driven by panic buying
\nfrom the corporate sectors as they feared that the rupiah's
\ndepreciation would last for a long period of time, thus burdening
\ntheir costs for importing raw materials and repaying dollar-
\ndenominated debts. -- JP<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-woes-may-last-longer-bi-undeterred-1447893297",
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"sponsor": "Okusi Associates",
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