Rupiah, composite index likely to be flat this week
Dadan Wijaksana, The Jakarta Post, Jakarta
The rupiah is expected to hover in a narrow and familiar range this week on the absence of fresh leads, as the market awaits developments from the ongoing Annual Session of the People's Consultative Assembly (MPR), analysts said.
Farial Anwar, a director at PT Currency Management Group, told The Jakarta Post the rupiah would stay at its current level of about Rp 9,000 per U.S. dollar throughout the week.
"For the time being, the rupiah is consolidating at its current level. And if there is no big news entering the market, this trend will continue," Farial said over the weekend.
The local currency closed last week at Rp 9,085 per dollar, up slightly from the previous week's close of Rp 9,150.
The Annual Session, which will see among other things a debate on constitutional changes, including direct presidential elections, ends on Aug. 10.
Farial warned, however, that the rupiah's performance would also be affected by how the U.S. stock market performed. He said Wall Street had noticeably weighed on regional markets, including Jakarta, during the past couple of weeks.
"And when the Jakarta stock market is down, this affects the rupiah in a negative way as traders rush to convert their proceeds to dollars," he said.
A succession of high-profile financial scandals in the U.S. has sent American shares tumbling.
This has sent bad signals to the rest of the world, which is questioning the resiliency of the U.S. economy, forcing down stock markets to lows that have not been seen in months.
A currency dealer also predicted a flat rupiah for the week, as the market waits for news from the Annual Session.
"Until the Annual Session is over, I think the rupiah will stay in the same range as last week's," the dealer at an international bank told the Post.
Another development the market will be watching closely, according to the dealer, is the demand for dollars from businesses to finance imports and debt payments, or even to speculate. It is likely corporate dollar demand will be high, which could put pressure on the rupiah, the dealer said.
However, Farial doubted this would affect the rupiah negatively, pointing out any high dollar demand would be offset by dollar selling by the Indonesian Bank Restructuring Agency (IBRA).
"IBRA will supply the market with dollars obtained from the sale of assets," he said.
The agency recently completed the sale of US$145 billion of nonperforming loans.
Meanwhile, the Jakarta Composite Index is also expected to be stagnant this week, with only a slight of chance of rising, a stock broker said.
"The index will not be far off from last week's range. Most traders will wait for news from the ongoing MPR Annual Session," he said.
The composite index ended last week at 456.32, up 14.4 points, or 3.3 percent from the previous week.
Throughout last week, daily volume averaged 593.96 million shares traded at a value of Rp 429.98 billion ($47.2 million), compared to the previous week's 816.4 million shares valued at Rp 354.3 billion.
State-owned telecommunications firm PT Telkom ended the week Rp 325 higher at Rp 3,650, while state international call operator PT Indosat was up Rp 650 at Rp 9,050.
Cigarettemaker Sampoerna rose Rp 275 during the week to close at Rp 4,000, while rival Gudang Garam was up Rp 250 at Rp 9,200.