BI upbeat on rupiah despite recent slide

BI upbeat on rupiah despite recent slide

Dadan Wijaksana, The Jakarta Post, Jakarta

The rupiah weakened on Friday against the U.S. dollar for the
fourth consecutive day at Rp 8,490 per dollar, but the central
bank said that the current movement was still "within range" and
that intervention was unnecessary.

Bank Indonesia senior deputy governor Anwar Nasution told
reporters that the central bank had no plans so far to intervene
in the market to support the local unit.

"The rupiah is still moving within (the expected) range. Why
should we intervene if the fluctuation remains insignificant," he
replied, ignoring the fact that the local unit has weakened by
around 1 percent during the past month.

The local currency closed at 8,490 per dollar, down from 8,475
on Thursday, with dealers attributing the losses to heavy dollar
buying by corporations to repay foreign debts.

Dealers also shared Anwar's optimism on the rupiah's prospects
in times to come, in line with positive sentiment ahead of widely
expected capital inflows from foreigners buying up local assets.

The sale of up to 45 percent of the shares in Bank Rakyat
Indonesia (BRI), the country's largest micro financing
institution, early next month is expected to generate between
US$400 million and $500 million in proceeds with the government
expecting foreign investors to take the lion's share of it.

Also in the pipeline are a number of other asset sale programs
by the Indonesian Bank Restructuring Agency (IBRA), including the
sale of the government's majority stake in Bank Internasional
Indonesia (BII).

All will continue to support the local currency, which has
been on a bullish trend against the dollar since the start of the
year. So far this year, the rupiah has appreciated by around 8
percent, thanks to flows of foreign capital attracted by the
improving domestic economy.

Signaling continued confidence in the rupiah and the economy,
Bank Indonesia on Friday also cut its overnight money market rate
by 25 basis points to 8.25 percent.

Two days earlier, Bank Indonesia raised its benchmark one-
month interest rate for the first time in six months from 8.51
percent to 8.53 percent. Despite the rise, market players remain
upbeat that the central bank will keep the rate at that level at
least until the end of the year.