Fall in rupiah to ease: Analyst

Fall in rupiah to ease: Analyst

Berni K. Moestafa, The Jakarta Post, Jakarta

Following last week's steep fall of the rupiah, pressure
against it may ease, one analyst said, but warned that the
weakening of the local unit was expected to continue this week.

Currency analyst Kahlil Rowter said the rupiah's drop would
moderate in coming days, provided no unexpected bad news hit the
market.

"However, the medium term outlook on the rupiah just isn't
good, the unit will sustain its downward trend," he told The
Jakarta Post over the weekend.

The market is losing patience as the government made little
headway on both the economic and political front, he said.

President Megawati Soekarnoputri conceded that economic
recovery had been progressing too slowly.

Speaking before the People's Consultative Assembly last week,
she painted a grim outlook of the nation's economic condition.

That, in part, is due to mounting debts that are crippling the
government's spending options, which could otherwise have been
extended to give the economy a much needed boost.

Lacking a spending push from the government, the economy has
been further hit by the absence of foreign investments and a
banking sector that has yet to resume its lending role.

But Khalil said Megawati's statement did little to hurt the
rupiah other than underscore its weakness in the longer term.

Last week's sharp plunge of the unit, mainly stemmed from
Unibank's shutdown, triggering fear of more closures to come.

He said after the initial shock that companies who had no
urgent need for the dollar had scooped the unit earlier to avoid
buying it at higher levels.

"Unlike speculators, who can sell their dollars at anytime to
take a profit, companies that obtain dollars early, are likely to
keep theirs," Khalil explained.

This was compounded by Bank Indonesia, which showed little
interest in preventing the rupiah's fall, he added.

"Even if Bank Indonesia says it can do little to help the
rupiah, the market feels more free to purchase the dollar," he
said.

With foreign reserves limited, he said, Bank Indonesia may
have lowered its intervention goal so as to moderate the fall of
the rupiah.

"There is nothing really negative going on now, but on the
other hand, without positive news breaking this trend, chances
for a recovery (of the rupiah) are scant," he said.

The rupiah took a series of blows during last week's trading,
which landed it at 10,620 against the U.S dollar from 10,253.

Khalil estimated further drops ahead, although there was a
slim possibility of the unit recovering as profit-taking sets in.

"Just like in the past, the rupiah plunges and then recovers a
bit. But basically, it loses more than it regains afterwards," he
said.

For this week, he estimated the rupiah would trade at 10,600
and below, or if negative sentiment was ebbing it would return to
between 10,200 and 10,300.

On the stock market, analyst Jasso Winarto of Sigma Research
said plans for more interest cuts by the U.S. Federal Reserve may
give the battered stock index some reprieve.

"The rate cut is expected early this week," he said.

But outside that, he added, the Jakarta Stock Exchange Index
would remain vulnerable to further losses.

Last week, the index closed at 380.65 down from 387.82 a week
before.