Charts, undue pessimism on RI favor rupiah
Charts, undue pessimism on RI favor rupiah
Dow Jones, Singapore
Technical analysis of the dollar versus the rupiah shows the
Southeast Asian currency is at a crossroads, but the Indonesian
currency is more likely to take the appreciation route in the
medium-term, says Jan Lambregts, head of Asia-Pacific research
Rabobank Group Treasury.
There is the unusual situation now whereby resistance and
support trendlines have converged Friday a few rupiah either side
of the current spot dollar price of Rp 8,880.
Lambregts says if dollar-rupiah drops decisively below the
support trendline drawn from a Rp 6,600 low mid-1999, this could
pave the way for a more sustained move down.
Counterbalancing this, however, is a resistance line from a
1998 dollar high toward Rp 17,000, and a break above this level
would suggest a move back up is a possibility.
On the daily chart, Lambregts notes the dollar has been
trading in a broad sideways range since the end of November last
year.
"We would locate key support and resistance at the lower- and
upper- boundary of this range respectively, that is Rp 8,800 and
Rp 9,000. Fairly firm intermediate support meanwhile can be found
at the IDR8,850 level, which has held since the end of January,"
he says.
To be sure, uncertainty over an expected war in Iraq
potentially can lead to violent swings in the exchange rate, but
the analyst says that "barring any major new terrorist strikes in
Indonesia," the rupiah should be able to post some modest gains
versus the dollar, and nominates a medium-term target of Rp
8,750.
"We feel many in the market are too pessimistic over the
Indonesian economy, hence macro (economic) data should provide
upside surprises. Additional IBRA asset sales appear to be in the
air as well and would be supportive of the rupiah. High nominal
interest rates will continue to make the rupiah relatively
attractive, even though this factor may become relatively less
important during the second half of this year," says Lambregts.
Moreover, fears of intervention by Bank Indonesia should keep
the rupiah firmly underpinned as well in upcoming months, adding
to Rabobank's case for a downward bias for the dollar in the
medium term.
Earlier this week, Indonesia released its fourth-quarter gross
domestic product figure, which, as analysts expected, showed a
slowdown from the previous quarter. Real, non-seasonally adjusted
GDP grew 3.8 percent on year compared to an upwardly revised 4.3
percent clip in the third quarter.
Quarter-on-quarter, GDP contracted 2.6 percent in the fourth
quarter on a non-seasonally adjusted basis.
"While the impact of the Bali attacks on tourism could clearly
be felt, many in the market had actually expected an even worse
figure," says Lambregts, highlighting the risks of upside
surprises on Indonesian economic data in coming months that could
aid the rupiah.
For 2003, Rabobank reaffirms its 4 percent growth forecast.
"We expect consumer-spending strength to continue. Indonesia's
sizable 'gray' economy may not show in official GDP figures, but
it has proven to be a significant cushion against the negative
impact of the Bali bombings and should see private consumption
further supported," he says.
As a net oil exporter Indonesia should also profit from higher
oil prices during the first half of this year.
Crude oil prices are near two-year highs on fears of a U.S.-
led war with Iraq, and curtailed output from Venezuela.