Rupiah ends up, tsunami impact likely limited

Rupiah ends up, tsunami impact likely limited

Dow Jones, Bloomberg, Jakarta

The rupiah ended higher on Monday as international pledges to help the country cope with the impact of the recent earthquake- tsunami disaster helped sentiment on the local unit, dealers said.

The dollar closed at Rp 9,305, down from its close on Thursday at Rp 9,345. The local currency market was closed on Friday ahead of the year-end.

Dealers said that the impact on Indonesia's overall economy is expected to be limited, especially with the natural gas production facility in the worst-affected Aceh province being relatively unscathed.

A large amount of funds from international donors is expected to flow into the country, which, if exchanged into the local unit, will push it higher, dealers said.

"Actually, we haven't seen significant purchases of the rupiah linked to the aid funds, but people expect it will happen sooner or later," a dealer with a foreign bank in Jakarta said.

"There's still demand from companies for dollars," hurting the rupiah, said Haviento, a currency trader in Jakarta at PT Rabobank International Indonesia told Bloomberg.

Indonesia's President Susilo Bambang Yudhoyono said on Monday that the government remains confident that the country will achieve a 5.5 percent growth in gross domestic product this year.

Separately, Finance Minister Yusuf Anwar said that the government will grant tax breaks to investors to boost much- needed investment in the country.

Still, the market is cautiously watching the public reaction to the government's plans to boost fuel prices later this year to help cut subsidy costs.

While investors may hail the government's move to cut subsidies to maintain the health of the state budget, such a move poses a risk of social unrest.

Dealers expect the dollar to trade between Rp 9,290 and Rp 9,330 on Tuesday.