'Gains in rupiah likely after bomb scare'

Berni K. Moestafa, The Jakarta Post, Jakarta

The battered rupiah might reclaim some of its lost territory in this week's trading on signs that the U.S. dollar could further weaken against regional currencies, and market jitters could ease off after a spate of bomb scares last week, one analyst said.

PT Danareksa Securities currency and stock analyst Ferry Latuhihin said the rupiah would remain above the 9,300 level against the dollar even if security concerns lingered.

"The Bali bomb explosion pushed the rupiah to 9,300, so I don't think the recent smaller one will have the same impact," he said last week.

A small bomb exploded last Thursday at a shopping mall in the West Java provincial capital of Bandung, injuring two people and pushing the rupiah down to 9,245 from 9,205 a week earlier.

The incident occurred about two weeks after nearly 200 people, mainly foreign tourists, died in the Bali bombing. Security concerns have since weighed on the rupiah.

However, Ferry said, the rupiah could find a respite in the weaker dollar at the regional front, as he expected Asian players to continue to unload their long dollar positions this week.

He added that should the rupiah draw too close to 9,300, Bank Indonesia would likely sell its dollars in an effort to prevent the local unit from moving into a wider trading range.

"Bank Indonesia can't afford a volatile rupiah. Volatility could upset market players," he said.

Bank Indonesia was seen heavily intervening in the currency market to stem the rupiah's fall at 9,300 during the first trading days after the Oct. 12 bombing.

Analysts have said that further market reactions would depend on government action to capture the Bali bombers.

Progress has been slow, but the international community has welcomed Indonesia's tougher stance against terrorism, preventing market sentiment from turning negative.

Still, fears of more attacks to come kept security concerns alive, and Thursday's blast further showed how unpredictable terrorist strikes were despite added security measures.

Moreover, the market remains wary over the economic fallout from the Bali blast, as tourism has taken a heavy blow, which would reduce foreign exchange inflows from tourists.

An International Monetary Fund team arrived in Jakarta on Friday to assess the impact of the blast on the overall economy. The government is already revising its 2003 state budget assumptions.

Against this backdrop, there is still room for the rupiah to strengthen, though not beyond 9,200. "I expect the rupiah to trade at around 9,200," said Ferry.

On the local stock market, the main index ended the week lower after slightly gaining in the middle of the week when shares earlier plunged to four-year lows due to the Bali bombing.

But expectations on positive third-quarter reports by market heavyweights state telecommunication companies PT Telkom and PT Indosat might pull the index up this week, said stock analyst Roberto Pardede on Friday.

"Their (Telkom and Indosat's) prices are quite low by now. Foreign securities know this and may come back," he said.

The stock market's sharp drop in the aftermath of the Oct. 12 bombing was mainly led by foreign investors taking fright at the prospect of further terrorist strikes. Local investors sparked the market's rebound.

Still the Jakarta Stock Exchange (JSX) Composite Index ended the week down at 353.65 from 360.90 a week before, which saw investors buying up shares at rock-bottom prices.