<i>In Indonesia</i><br>Possibility of U.S. attack taunts rupiah's gains: Experts

In Indonesia
Possibility of U.S. attack taunts rupiah's gains: Experts

Berni K Moestafa, The Jakarta Post, Jakarta

The probable U.S. strike against Afghanistan could block the
rupiah's timid upward trend this week, as the market geared for a
long dollar position to anticipate a backlash from radical groups
here, analysts said.

Head of the debt income section at PT Vickers Ballas
Indonesia, Wiwan Wiradjaja said market players remained wary over
the domestic reaction to an anticipated U.S.-led military strike
against Afghanistan.

"The rupiah is recovering, but will likely slip on unexpected
bad news," Wiwan told The Jakarta Post over the weekend.

He said most players had factored in the possible U.S. strike,
but were still unsure on how that could affect domestic security.

"If calls for a holy war (by Muslim militants) intensify after
the attack, this will have a downward impact on the rupiah," he
predicted.

Local radical groups have been staging anti-U.S protests over
the past few weeks in response to America's planned attack
against Afghanistan.

A military strike seems inevitable, as Afghanistan's Taliban
regime continues to defy demands from the West to hand over Osama
Bin Laden, the prime suspect behind last month's terrorist attack
in the U.S.

The disaster, crushing U.S consumer and business confidence,
has also left a gaping hole in the world economy.

Reflecting this grim outlook, the rupiah has been steadily
losing ground, amounting to seven percent in value since the
attack.

Currency dealers have said the rupiah's past rebound after
breaching the 10,000 barrier against the U.S dollar last week,
was in part due to players cooling off from the panic that
followed the terrorist attack.

Bank Indonesia stepped in with intervention, and has said it
would continue to do so if necessary.

"Trading has been relatively thin; this should help Bank
Indonesia intervention moves," Wiwan continued.

The central bank has also been keeping a tight lid on interest
rates to absorb liquidity and ease inflationary pressure.

But stock analysts warned of fresh rupiah supplies flooding
the money market by investors dumping shares in favor of dollars.

Dropping export revenues subsequent to the slump in the U.S.
market, also threatened the inflow of dollar supplies.

"Fundamentally, the rupiah is undervalued, however, given the
still negative outlook, it's unlikely it will strengthen any time
soon," Wiwan explained.

According to Wiwan, the rupiah could hover this week between
9,700 to 9,900. Last week, it ended trading down at 9,800 from
9,710 a week before.

A dealer at a local securities company said regional security
uncertainties, and the absence of fresh leads at home, could
prolong the market index fall to its fifth week.

According to her, players bow to selling pressure by the few
foreign ones dumping shares in the wake of increased radical
movements.

"At this moment, investors prefer not to hold stocks," she
said.

She predicted the Jakarta Stock Exchange Composite Index may
still test the 350 level, after ending last week down at 381.59
from 392.47 a week earlier.