Rupiah won't drop during MPR session: Economist<\/p>\n
JAKARTA (JP): The rupiah is not likely to weaken much in the
\nrun up to the Aug. 7 through Aug. 18 People's Consultative
\nAssembly (MPR) General Session as some have feared, according to
\nan economist at a state bank.<\/p>\n
Bank Mandiri chief economist Martin Panggabean said on Friday
\nthat the current weakening of the rupiah was only temporary as
\nthe country's economic fundamentals had improved.<\/p>\n
He also said that the move by Bank Indonesia to curb
\nspeculation on the rupiah would also help limit the impact of
\npolitical instability on the local currency.<\/p>\n
\"The pressure on the rupiah is only temporary ... and
\nespecially if Bank Indonesia succeeds in curbing speculation in
\nthe rupiah by foreign banks,\" he said at a seminar on the
\neconomy.<\/p>\n
The rupiah ended higher in late trading on Friday at 8,945 per
\nU.S. dollar, compared to 8,970 on Thursday.<\/p>\n
The rupiah has been under strong pressure this month due to
\ncontinuing political uncertainty ahead of the MPR session.<\/p>\n
The local unit dropped to a 21-month low of Rp 9,570 per
\ndollar earlier this month.<\/p>\n
But sudden inspections by Bank Indonesia officials into bank
\ndealing rooms to curb speculation has helped to prevent the
\nrupiah from breaking through the Rp 10,000 level.<\/p>\n
Bank Indonesia officials said that it made the inspections to
\nensure that the banks abided by the existing prudential rulings,
\nincluding a prohibition for banks from surpassing the 20 percent
\ndaily net open position limit, and from opening forward contracts
\nworth more than US$5 million with nonresidents.<\/p>\n
Bank Indonesia acting governor Anwar Nasution also called on
\nSingapore and other neighboring authorities on Thursday to help
\ncurb speculation on the rupiah.<\/p>\n
Many have feared that the rupiah could drop even lower than
\nthe Rp 10,000 level due to the political uncertainty ahead and
\nduring the MPR session.<\/p>\n
President Abdurrahman Wahid will give an account of his first
\n10 months in power at the session, which is expected to be tense
\nas many fear that the lawmakers will use the meeting to impeach
\nthe President.<\/p>\n
The MPR is the country's highest legislative body and has the
\nright to unseat the President. But several senior politicians
\nhave said that there would be no impeachment against the
\nPresident in the August session.<\/p>\n
Approximately 68,000 police and military troops will be on
\nfull alert during the 12-day session to maintain security,
\nparticularly in Jakarta and the surrounding areas.<\/p>\n
He said that based on the country's economic fundamentals, the
\nrupiah should be stronger.<\/p>\n
Martin forecast that the rupiah would strengthen to about
\n8,500 per dollar this year, and to beyond 8,000 next year, driven
\nparticularly by the country's stronger export revenue.<\/p>\n
He said that world trading volume would continue to increase
\nover the next couple of years, and commodity prices would also
\nrise.<\/p>\n
Martin dismissed suggestions that the current weakening of the
\nrupiah was similar to what happened in 1997 and 1998 when the
\nrupiah dropped to as low as 17,000 per dollar.<\/p>\n
He said that although the country's foreign debt level
\nremained a problem now, as it was in 1997, the economic
\nfundamentals had now improved, including in terms of the current
\naccount surplus and the relatively low inflation.<\/p>\n
He also said that in 1997, the rupiah was overvalued, while
\nnow people believed that the rupiah was undervalued.<\/p>\n
\"The rupiah is now undervalued, there's no way to rise further
\nfrom the current level,\" he said.<\/p>\n
Martin, however, admitted that the rupiah would remain
\nvolatile over the near term due to the remaining political
\ninstability.<\/p>\n
He also said that the country's current foreign exchange
\nsystem was the most liberal in the world, even so than the system
\nin Singapore.<\/p>\n
He said that this was one factor causing the rupiah to be
\neasily speculated upon by overseas players.<\/p>\n
He said that introducing a limited form of curbing overseas
\ntrading of the rupiah would also help in curbing speculation on
\nthe local unit. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiah-wont-drop-during-mpr-session-economist-1447893297",
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