Rupiah expected to remain stable
Fitri Wulandari, The Jakarta Post, Jakarta
The rupiah is expected to hover at between Rp 8,650 and Rp 8,700 per U.S. dollar this week amid prevailing positive sentiment and weakening confidence in the greenback, according to an analyst.
"As long as there is no negative political news, the rupiah will stay in this range," Fauzi told The Jakarta Post over the weekend.
The rupiah last week strengthened slightly to Rp 8,615 per dollar, from Rp 8,630 the previous week.
Fauzi said that on the domestic front, the ongoing stable political situation and continuing positive sentiment following the recent disbursement of the International Monetary Fund's US$358 million loan tranche to the country would bode well for the local currency.
The rupiah has appreciated by around 15 percent against the dollar since the beginning of this year.
Fauzi added that people generally preferred to hold rupiah funds because of its higher interest rate compared to dollar funds.
"People prefer to keep rupiah and place it in Bank Indonesia SBI promissory notes or the money market as the interest rate is higher than (the rate of dollar funds)," he said. They currently carry an interest rate of more than 15 percent.
He said this had helped the rupiah to remain stable at its current level despite fears companies would try to purchase dollars to repay foreign debt.
He, however, said that such concerns were being exaggerated, pointing out that only a third of the $55 billion corporate foreign debts had to be repaid in the near term.
Fauzi said the region's generally weak sentiment on the U.S. dollar was another factor helping the rupiah.
In Asia, the U.S. dollar fell across the region, spurred by the latest accounting scandal by WorldCom.
Meanwhile, the stock market is expected to rebound this week after a 3.8 percent drop last week due to profit taking.
The Jakarta Stock Exchange Composite index dropped 20.85 points to 505.01 points on Friday, from 525.86 points the week before.
"Most blue chip shares, such as Telkom were corrected last week, so the trend will be bullish in the coming week due to a technical rebound," Zulfikar, analyst at Mandiri Securities, told The Post over the weekend.
He predicted the composite index could rise by 4 to 5 points in the coming week.
Last week, daily volume averaged 499.3 million shares valued at Rp 510.3 billion ($59 million) compared to the previous week's 607.7 million shares valued at Rp 396 billion.
Telkom, the state-owned telecommunication firm, fell Rp 325 over the week to Rp 3,750. While its competition, state international call operator Indosat, closed Rp 700 higher at Rp 11,950.
Cigarette maker Sampoerna dropped Rp 75 over the week to Rp 4,1. Its rival Gudang Garam was up Rp 500 to close at Rp 10,550.
While the U.S stock market was still clouded with yet another accounting scandal by Worldcom, Zulfikar said the fiasco would have little impact on the country's stock market.
WorldCom Inc. admitted last week that it improperly booked $3.8 billion of expenses. The scandal has forced foreign investors to drop U.S. stocks from their portfolio.
Fauzi was of the same opinion, saying the scandal would not cause much uproar here like in the U.S.
"It caused uproar there because people thought it (the scandal) could not happen, because the U.S. supposedly applies strict accounting standards," he said.
But it is public knowledge that public accounting is in a mess here, Fauzi added.