Paris Club deal lifts rupiah to 8-month high
The Jakarta Post, Jakarta
The rupiah rose to its highest spot since September last year on news that Indonesia's sovereign creditors at the Paris Club agreed to delay debt repayments of US$5.4 billion.
On Monday trading, the rupiah closed at 9,415 against the U.S. dollar from 9,550 last Friday.
Its surge continued gains made last week, when the market scooped the unit on confidence of a successful Paris Club deal.
Two days of talks with creditors last week, secured the rescheduling of $5.4 billion in debt maturing in this and next fiscal year.
The deal lifts pressure off the rupiah, as it pushes back dollar demand in that amount by more than 18 and 20 years.
"The main mover was the Paris Club, but other factors have also contributed to the stronger rupiah," said Baradita Katoppo, president at independent research firm IBAS.
He said recent news of major deals with foreign investors coming through would add to fresh dollar supply to the market which remains starved of foreign direct investment inflows.
The currency market also expected $400 million in new loans from the International Monetary Fund (IMF), he said. The fund is slated to decide the loans' disbursement sometime this month.
David Chang, president at foreign based securities firm DBS Vickers, said the Paris Club deal showed Indonesia's economic reform program was on track, although more needed to be done to keep the rupiah moving north.
He said the next reform target to watch out for would be the planned sale of Bank Niaga by June to a strategic investor.
Defying the country's huge foreign debt overhang, the rupiah has been steadily rising since early this year, taking a boost from each positive news.
After a turbulent 22 months under former President Abdurrahman Wahid, analysts attributed the rupiah's upward trend to the more stable political climate, relative fewer security disturbances, and progress on the economic front.
The local unit began climbing since President Megawati Soekarnoputri rose to power in July last year, but fell for the rest of the year in the aftermath of the Sept. 11, terrorist strikes in the U.S.
Baradita said the rupiah might be reaching its limit, as its current levels would attract buyers with foreign debts and speculators taking profit on the cheaper dollar.
On the Jakarta Stock Exchange market, the main index climbed to 549.83 points from 539.27 on Friday.
Baradita said stock prices could further rise as many remained undervalued despite the index gaining some 35 percent since early this year.