Pressure to remain on rupiah this week, analysts predict

Dadan Wijaksana, The Jakarta Post, Jakarta

A high demand from corporations for U.S. dollars, coupled with the sliding value of regional currencies against the greenback, will continue to cast a shadow over the performance of the rupiah this week, according to analysts.

With companies in need of dollars to cover their debt payments and import expenses, the demand for the dollar is expected to remain high throughout the week, thereby putting more pressure on the local currency.

Wiwan Widjaja, an analyst at PT Vickers Vallas, told The Jakarta Post that suspected dollar buying by the state-owned oil company, Pertamina, would likewise hurt the rupiah.

"Pertamina reportedly needs around US$100 million this month to cover routine spending on fuel imports, this will ... put pressure on the rupiah," Wiwan said over the weekend.

Another disadvantage for the local market, he added, was the absence of a market stimulus from either external or internal factors.

While the global economic downturn is showing little sign of improving, the macro condition in Indonesia is relatively less than convincing.

Meanwhile, a currency dealer said, the market will remain cautious, keeping a close eye on the dollar's movement against the rest of the Asian currencies, especially the Japanese yen.

The dollar, on the other hand, has been in a fine form lately, seemingly becoming stronger and stronger against other currencies, including the yen and the euro.

Negative sentiments, said the dealer, who asked not to be identified, would also come from government plans to increase various prices for electricity, fuel and telephone rates at almost the same time.

This would make the market nervous in light of constant fears of social disturbances throughout Indonesian society which could easily be the end result of the rate hikes, which have always been a sensitive issue.

Despite all the pressure, however, both the dealer and Wiwan predicted, the value of the rupiah will not drop further than 10.500 against the dollar, provided that the Bank Indonesia will intervene.

The rupiah closed at 10.420 last week against the greenback, slightly stronger than the 10.450 of the previous week.

In the stock market, meanwhile, the Composite Index will likely remain stagnant, moving at a narrow range on the back of familiar low trading value.

"The Index movement is expected to remain flat; it'll be hard to prop up the Index when the value of trading is low," Zulfiqar of the Bank Mandiri Securitas, told the post over the weekend.

Zulfiqar believed that the situation would remain the same in the near future, especially when foreign players, with their big capital, keep clear of the Indonesian market.

Most foreign investors have written Indonesia off of their investment radar, and the recent economic slowdown has only made them more cautious about investing their money.

The absence of big players, according to Zulfiqar, was the main impetus behind the low trading value.

Last Friday, with the trading value of Rp 470.6 billion (some $46 million) the Composite Index of the Jakarta Stock Exchange closed at 385.20 points, down from 392.03 the week before.