Aggressive U.S. dollar buying expected

The Jakarta Post, Jakarta

In the first week of the new year, the currency market is expected to be more active with demand for dollar will remain high, putting the rupiah under familiar pressure, an analyst said.

Noted currency analyst Farial Anwar told The Jakarta Post over the weekend, the opening days of trading would usually be highlighted by the more aggressive speculators.

"In early trading of the year, the market is likely to be more active, marked by the aggressive trading by speculators," Farial, who is also the director of PT Currency Management Group, said.

Farial added that the wide margin between demand and supply of the dollar, coupled with the absence of pro-market monetary policies will keep weighing on the local currency.

With the year-end festivities having come to an end, there will be less demand for the rupiah and there will be no reason for the local currency to strengthen.

From November to the third week of December, rupiah was on the upward trend, mostly due to strong demands for the currency ahead of the year-end festivities.

However, the rupiah got back to its declining trend as demand for rupiah lessened.

Last week, rupiah closed at 10.450 against the American greenback, down from 10.180 in the previous week.

And, as the demand for dollars remain strong while on the other hand there is a lack of dollar supplies on the market, Farial predicted the declining pattern of the rupiah would continue.

Demands for dollar will still come from importers and corporations who need to repay their huge foreign debts, and speculators.

"We cannot underestimate speculators, because facts show that it is easier to speculate against the rupiah rather than the dollar," he warned.

On the contrary, the market is running out of resources to supply the dollar, with the global economic slowdown affecting the country's export performance and direct foreign investment.

The exporters and investors are used to be the main suppliers of dollars into the country.

However, Farial forecasted the rupiah will go no lower than 10.500.

Unlike the currency market, trading in the stock market will remain subdued in the first week of the new year, according to an analyst.

"With most of the investors have yet to return from vacation, I expect the market to remain quiet, especially in the first two or three days of trading," Ario Ardhikari, an investment manager at ABN Amro, told the post.

There will be a small number of speculators, he added, but with the absence of big players and significant market stimulus, both the trading volume and the index movement will be hovering at a narrow range.

Last week, the Jakarta Stock Exchange Composite Index closed at 392.03 points, up from 378.25 the week before.

Ario cited the slight increase in last week's index as normal occurrence to close the year, but he doubted the increase trend to continue this week.