Susilo's policy done little to rupiah<\/p>\n
The Jakarta Post
\nJakarta<\/p>\n
President Susilo Bambang Yudhoyono's four-policy package has done
\nlittle to help defend the rupiah, as analysts have criticized it
\nas not including measures that had been expected by the market.<\/p>\n
Following the President's anticlimactic announcement late on
\nWednesday -- on energy, monetary, fiscal and investment policies
\n-- the rupiah ended slightly up at Rp 10,225 a dollar on
\nThursday, from its Rp 10,250 closing the previous day.<\/p>\n
The currency had, however, plunged to Rp 10,800 during midday
\ntrading, as the market reflected disenchantment over Susilo's
\nremarks.<\/p>\n
But the rupiah managed to slowly regain strength from Bank
\nIndonesia (BI) investments in the bond market.<\/p>\n
The Jakarta Stock Exchange mirrored the forex market's
\ndisappointment in its composite index, opening its trading 2.02
\npercent lower at 1,028.822 points, before strengthening a bit to
\nclose the day 1.03 percent lower at 1,039.230 points.<\/p>\n
Markets were closed on Friday in observance of the Ascension
\nDay of the Prophet Muhammad.<\/p>\n
The central bank became something of a savior to the rupiah
\nagain as it absorbed Rp 10.85 trillion in excess liquidity
\nthrough its 10.82 percent one-day overnight rate offered to
\ncommercial banks. The BI also absorbed on Wednesday Rp 5.81
\ntrillion through its 9.51 percent-rated one-month promissory
\nnotes.<\/p>\n
The rupiah also got a boost from investors supplying the
\nmarket with dollars after their recent buying up of the
\ngovernment's rupiah-denominated bonds.<\/p>\n
The minister of finance sold Rp 2 trillion worth of bonds on
\nTuesday, despite Indonesia's debt instruments taking a recent
\nbeating due to the rupiah's weakness and rising interest rates.<\/p>\n
The rupiah has weakened by more than 10 percent over the past
\nmonth alone, as soaring oil prices push the country's oil imports
\nfor its fuel subsidies higher, burdening the state budget to the
\nbrink of fiscal instability.<\/p>\n
Standard Chartered chief economist Fauzi Ichsan said the
\nmarket had actually expected the government to give a credible
\nfiscal policy package that included a time line for fuel subsidy
\nreductions and a state enterprise privatization program.<\/p>\n
"For the time being, the markets are likely to give the
\ngovernment the benefit of the doubt that the finance ministry and
\nthe Office of the State Minister of State Enterprises will come
\nup with more concrete measures," he said.<\/p>\n
"If they don't, the rupiah is likely to be under pressures
\nagain, which will force BI to increase rates more aggressively
\nthan necessary.<\/p>\n
Bank International Indonesia (BII) chief economist Ferry
\nLatuhihin also warned that the situation could worsen.<\/p>\n
"Believe it or not, once Standard and Poor's and Moody's
\ndowngrade our sovereign rating, the dollar will go up to Rp
\n12,000, the index down to 800 and the bond market will crash," he
\nsaid. "The bubble is waiting to burst."<\/p>\n
Standard and Poor's, an international ratings agency, indeed
\ndowngraded the country's rating outlook on Friday from positive
\nto stable.<\/p>\n
The agency said it had affirmed its B+ long-term foreign and
\nits BB long-term local currency sovereign credit ratings on
\nIndonesia as well as affirming its B short-term sovereign credit
\nratings.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/susilos-policy-done-little-to-rupiah-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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