Pressure to remain on rupiah this week, analysts predict

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.