'Rapid appreciation of rupiah not good for exporters'

'Rapid appreciation of rupiah not good for exporters'

Dow Jones
Jakarta

A rapid strengthening of the rupiah could hurt the country's
exporters, Bank Indonesia Governor Burhanuddin Abdullah said on
Monday.

"A too rapid rupiah appreciation is not good for business," he
told reporters.

But Burhanuddin said the market should set the rupiah's level,
indicating the central bank was not yet considering significant
intervention in the foreign exchange markets.

The governor declined to give a rupiah level that he felt
would be suitable for exporters.

The rupiah retreated from its intraday peak but remained at a
33-month closing following the statement. The local unit ended
at Rp 8,175 per U.S. dollar late on Monday, up from Rp 8,275 on
Friday.

The rupiah has been appreciating rapidly during the past
couple of months on the back of capital inflows and the dollar's
broad weakness against regional currencies, dealers said.

Citibank said in a research note Monday that exporters were
likely to complain if the rupiah strengthens beyond Rp 8,000.

Although Indonesian stocks and bonds have risen strongly in
recent months, helped by lower interest rates, the real economy
is lagging behind, Citibank said. Low investment and falling
consumer spending is making it hard for manufacturers.

A strong rupiah also makes it hard for them to compete in
export markets against countries that have exchange rates linked
to the U.S. dollar such as China. Textiles are an important
employment sector for Indonesia, which competes closely with
China in low-end manufacturing industries.

The rupiah has been free floating since the 1997-98 Asian
crisis, but the central bank manages the local currency through
intervention in the market.

Separately, the Indonesian Textile Producers' Association
expressed concern on the rapid appreciation of the local unit.

"The rupiah's strength is not competitive and bad for
exporters," said Benny Sutrisno, the association's chairman. "The
costs in terms of dollars will go up, while our export revenues
in rupiah terms will fall."