BI sees firmer rupiah next week

The Jakarta Post, Jakarta

Bank Indonesia (BI) said the recent weakening of the rupiah against the U.S. dollar was temporary, and should not be a cause for concern.

BI deputy governor Aslim Tadjuddin said on Friday the rupiah was expected to strengthen next week, as the country's economic indicators had continued to improve.

"The weakening of the local unit is only temporary. There is no reason for us to be worried. God willing, the rupiah next week will (strengthen) again to below Rp 8,600 (per dollar)," he said.

He said the recent weakening of the rupiah was caused by the strengthening of the greenback against many other currencies in the region as the U.S. economy continued to improve. Political developments at home in relation to the general election has also been pressuring the rupiah.

After falling by 0.7 percent since the start of the month, the rupiah closed on Friday slightly higher against the dollar on suspected intervention by the central bank, Dow Jones quoted dealers as saying.

The rupiah closed at Rp 8,620, up from Rp 8,635 on Thursday.

Dealers said Bank Indonesia was suspected of selling dollars via state-owned banks to help the rupiah.

The central bank has previously said it would intervene in the currency market if necessary to defend the rupiah.

Dealers said foreign banks here sold dollars, as the currency seemed to have lost some steam for now against the yen. It remains unclear if the U.S. unit is poised for a sharp downward correction.

Dealers expect the rupiah to trade between Rp 8,600 and 8,650 on Monday.

Meanwhile, in regards the benchmark interest rate, Aslim said there was room for a further decline this year, albeit at a slower pace.

He said the decline would depend on inflation in April, which will be announced by the Central Statistics Agency early next month.

Bank Indonesia has cut down the interest rate of its one-month SBI promissory notes by around 5.6 percent during the past year, thanks mainly to a benign inflation environment.