BI sees pressure on rupiah to be short-lived

BI sees pressure on rupiah to be short-lived

The Jakarta Post
Jakarta

Bank Indonesia senior deputy governor Anwar Nasution said on
Wednesday that the current weakening of the rupiah would be
short-lived, in a statement aimed at trying to calm nervous
financial markets following the deadly bomb attack at the JW
Marriott Hotel in Jakarta.

Anwar said the central bank now had a better monitoring system
and stronger foreign exchange reserves to help defend the rupiah.

"Bank Indonesia is ready to anticipate threats against the
rupiah. Nothing to be worried about, we have what it takes to
stabilize the rupiah," Anwar told reporters.

"... And our track record in handling similar situations has
also been good," he added, referring to the relatively quick
recovery of the rupiah following the bomb attack in Bali last
year and other negative incidents.

Aside from its convincing international reserves -- currently
at around US$34 billion -- Anwar said the optimism was also based
on the central bank's ability to quickly gather market
information and its tighter supervision of banks, which means
that Bank Indonesia could immediately detect speculation
activities against the local unit.

The rupiah ended slightly higher on Wednesday at Rp 8,600 per
U.S. dollar, after falling by 2.1 percent to 8,665 on Tuesday
after the bomb blast. Reports that the central bank was ready to
intervene in the market, pushed the rupiah higher to 8,550 before
lunch break.

Dealers said that the central bank was not seen making
intervention.

But they said that overall sentiment remained weak against the
local unit as the bomb incident renewed concern of the
difficulties in curbing terrorism and the negative impact on the
economy. Investors were also still waiting to see how the
government would handle the situation.

In a sign to show its confidence in the economy, the central
bank continued to reduce its benchmark rate on Wednesday to 9.07
percent from 9.10 percent the previous week.

The interest rate on the three-month Bank Indonesia SBI
promissory notes was also lowered to 9.07 percent from 9.18
percent.

The increase in the value of the rupiah since early this year
has been seen as a key factor contributing to the current benign
inflation level, which in turn provides greater room for the
central bank to continue cutting its interest rates. But the
hard-won stability in these macroeconomic indicators was put
under threat by Tuesday's blast.

Meanwhile, Bank Buana president Pardi Kendy was also
optimistic that the pressure on the rupiah would be short-lived,
provided the government immediately takes credible action to
solve the bomb attack.

"Hopefully similar occurrences will not happen again. If
that's the case, the rupiah will become stable again and it may
even move in a range of 8,500 per dollar," Pardi said.

Dradjad Wibowo, an analyst at the Institute for the
Development of Economics and Finance (Indef), concurred.

"It is important for Bank Indonesia to keep the rupiah below
8,700 per dollar in the next couple of days, to give positive
signals to investors.

"Because once the rupiah hits above that level, I fear it
would become uncontrollable," he said.