'Gains in rupiah likely after bomb scare'

'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.