Rupiah faces bleak outlook again this week
Rupiah faces bleak outlook again this week
By Bernie K. Moestafa
JAKARTA (JP): The rupiah faces a bleak outlook again this week
as anticipation of a political showdown between President
Abdurrahman Wahid and his opponents at the end of this month is
expected to further spur dollar buying, analysts predict.
They said the rupiah could breach the 12,000 level against the
U.S dollar.
"In anticipation of political problems, people buy dollars
ahead of time," said president of Vickers Ballas Tamara, David
Chang, over the weekend.
He said that with political tension escalating fast,
speculators and panic buying would rule the market.
A House of Representative plenary session on April 30 will
decide whether to issue a second memorandum of censure against
the President, which could bring him closer to impeachment.
Abdurrahman has lambasted such a move as unconstitutional and
has insisted on serving his full term until 2004.
Fears that supporters of both sides will pick up the fight
from the political elite have increased in the past few weeks.
Thousands of the President's supporters have pledged their lives
for him, in what they believe would be a jihad against his
enemies.
On April 29, supporters of the President will flood Jakarta to
join a mass prayer organized by Abdurrahman's Nahdatul Ulama
organization.
In response, organizations of various backgrounds have
threatened to mobilize their members against President
Abdurrahman's supporters should they enter Jakarta.
Chang said fears that the capital could descend into anarchy
ran high. This, he said, would keep fueling the rupiah's descent.
He said that only a compromise -- the President surrendering
his power -- could defuse the tension. "I don't think any leader
in this world would want to be responsible for leading his
country toward destruction," he said.
Chang warned that the rupiah could enter a free fall again,
like it did during the peak of the economic crisis in 1998.
Faltering support from international lenders can no longer
cushion the impact of the rupiah's fall, he added.
With no political solution in sight, he said, the financial
market might see another crash similar to that in 1998. "Back
then the rupiah's fall surprised us; this time we know what's
coming," he said.
President Abdurrahman on Thursday warned of a national
rebellion if legislators proceeded with a second censure of him.
The rupiah took the warning badly, breaching the important
barrier of 11,000 against the greenback.
But Friday trading brought the rupiah close to the 12,000
level, ending at 11,925 to the dollar, down from the previous
week's close at 10,580.
Currency analyst Farial Anwar said a thin dollar supply amid
soaring demand for the unit caused Friday's volatile trading.
"Whatever price you ask for the dollar, they (the market) will
buy it," he explained.
The market also realizes that Bank Indonesia has only limited
resources to intervene, he said. He added that concerted efforts
between state companies and the central bank to shore up the
rupiah had failed.
Farial shared David's view that the rupiah was close to
repeating its 1998 free fall, as it was already highly volatile.
He said that expectations of the International Monetary Fund
(IMF) soon disbursing its long delayed US$400 million tranche had
run aground.
"It's much clearer now that the IMF wants to delay the third
tranche as long as possible and other international lenders will
do the same," he said.
As a result of the worsening political climate, Farial added,
almost all macroeconomic indicators are suffering, adding yet
more pressure on the rupiah.
Farial said that demand for the dollar was so high that even
stock investors were buying the foreign unit. This, he said,
brought down the local stock market index.
Stock market analyst Zulfiqar at Mandiri Sekuritas said that
domestic pressure on the stock market had outweighed positive
development outside.
"Gains in regional stock markets, the Fed's (U.S. Federal
Reserves) interest cuts, none of that has helped ours," he said.
The Jakarta Stock Exchange (JSX) Composite Index recorded
sharp falls for almost the entire last week, to end at 342.85
from 365.98 in the week before.
Zulfiqar said he expected continued selling pressure across
the board, with a possible rebound to occur among only blue
chips.
According to him, the JSX index might further drop to breach
the 340 level in trading this week. (bkm)