Rupiah expected to remain flat this week

Rupiah expected to remain flat this week

The Jakarta Post
Jakarta

The rupiah will likely continue its recent steady performance
and hover at about 9,200 to the U.S. dollar as pressure from the
Bali bombing tragedy eases, said one analyst.

Director of the Currency Management Group Farial Anwar
estimated the rupiah to move within a narrow range of between Rp
9,200 and Rp 9,240 this week.

"Over the last couple of weeks, the rupiah's movement seems to
have returned to the trend before the (Bali) bombings when it was
trading within a narrow range. Only this time it will be at a
higher level," Farial said over the weekend, adding that he
expected the same for this week's trading.

The Oct. 12 terrorist attacks in Bali renewed pressure on the
local currency, but Indonesia's tougher stance on terrorism, had
helped alleviate some of the security concerns weighing on the
currency market.

The rupiah ended last week at 9,225 to the dollar, slightly
higher than the previous week's closing of 9,240, which is
roughly the same level as the week before.

Farial attributed the rupiah's steady showing to a relative
balanced supply and demand in the money market, and continued
intervention from Bank Indonesia to aid the rupiah.

But he warned of new pressure amid rising dollar demands ahead
of the festive season in late December, starting with Idul Fitri,
Christmas and Chinese New Year in January.

"About this time importers' demand for dollars is usually on
the rise to meet a surge in demand for consumptive goods. This
might threaten the currency," Farial said.

Aside from seasonal factors, worries on economic and political
fronts could weigh on the rupiah toward year's end.

The Bali bombing has virtually cut off the dollar supply from
the tourism sector, while security fears are hurting business
confidence.

Measures to deal with the economic impact, however, are taking
shape. The government is revising its 2003 state budget and has
included plans to inject a Rp 5.9 trillion stimulus package into
the economy.

Creditor countries indicating their support for a greater 2003
budget deficit have also spurred the money market into action, as
it signals both international confidence and a dollar supply for
next year.

On the political front, investigation into the bombing, which
killed nearly 200 people, is slowly progressing.

A feared backlash from Islamic hard-liners has yet to
materialize after authorities arrested Abu Bakar Ba'asyir in
connection for a string of bombings during Christmas in 2000 and
a failed plot to assassinate then vice president Megawati
Soekarnoputri.

Abroad, Ba'asyir is said to lead the regional terrorist group
Jamaah Islamiyah, which some suspect of having a hand in the Bali
bombing.

Turning to the stock market, the Jakarta Stock Exchange (JSX)
Composite Index is expected to continue its rise albeit on
limited gains, said a dealer.

"Given last week's rather surprising rise, the buying will
slow down this week," said a stock dealer at a local brokerage,
explaining that investors who had purchased shares at lower
prices were likely to sell after prices have gone up.

"But the overall movement will still be upward," he added.

The index rose more than 4 percent last week to close at
371.14 points, compared to 353.65 the week before.

The daily volume averaged last week at 439.18 million shares
worth Rp 329.28 billion (US$35.7 million) compared to last week's
451.94 million shares worth Rp 355.18 billion.