BI sees rupiah settling down at about Rp 9,000

BI sees rupiah settling down at about Rp 9,000

The Jakarta Post, Jakarta

The rupiah is unlikely to strengthen much beyond the Rp 9,000 per
U.S. dollar level despite the current weakening of the dollar
against many currencies, according to Bank Indonesia Governor
Burhanuddin Abdullah.

He explained that the limited room for the local unit to
appreciate against the American greenback was due to strong
dollar demand at home from the corporate and banking sectors to
repay maturing debts and finance imports.

The central bank predicts that the rupiah would settle
somewhere around 9,000 to the dollar until the end of the year,
and stay there next year.

"The rupiah should have strengthened like other currencies due
to the weakening dollar, but a high demand for dollars lately has
not allowed it to strengthen as we previously expected," he told
reporters on Thursday.

"So unfortunately, or fortunately, the rupiah will stabilize
at the Rp 9,000 level in the meantime."

Central bank officials previously estimated that the rupiah
could strengthen to below the 9,000 level by the end of the year.
A stronger rupiah would help curb inflationary pressures as it
would make imported goods cheaper. A milder inflationary
environment would, in turn, provide room for the central bank to
further cut interest rates.

The U.S. dollar has been weakening against major currencies
amid rising concerns over U.S. twin budget and current account
deficit problem.

The rupiah ended higher on Thursday at 8,952 per dollar from
8,976 the previous day on improving investor sentiment toward
Indonesia and the dollar's global weakness, dealers said.

Dealers said the improving political environment in Indonesia
following the formation of the new government under President
Susilo Bambang Yudhoyono last month has been attracting capital
inflows to the country.

"Underlying sentiment for the rupiah remains positive due to
expectations of an improved economy under the new government,"
said a trader with a state-owned bank as quoted by Dow Jones.