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.