Rupiah gains from peaceful election: BI
Dadan Wijaksana, Jakarta
The trouble-free presidential election has reduced the risks of uncertainty and improved people's expectations on the economy -- thus easing pressure on the rupiah, according to the central bank.
"It's a relief as it (the election) has reduced various risk factors stemming from this transitional period.
"The election has been swift, safe, and so orderly that the people feel comfortable about it," Bank Indonesia Governor Burhanuddin Abdullah said on Wednesday.
Burhanuddin was confirming the market's positive reaction to the country's first direct presidential election, which has seen an upswing of the local unit against the U.S. dollar since early last week.
The rupiah maintained its strong hold on the dollar for the seventh day in a row, to close on Wednesday at 9,005, slightly up from 9,020 the day earlier.
While last week's surge had plenty to do with confidence over the election, the market's bullish sentiment has grown even stronger after that confidence actually materialized.
Last week, the rupiah climbed by some 3 percent.
Most of the 155 million registered voters cast their votes on July 5 to determine the country's leadership for the next five years.
With the tally now close to half of the votes, Susilo Bambang Yudhoyono is leading the way after securing about 33 percent of the vote, with Megawati Soekarnoputri and Wiranto second and third respectively.
Some dealers have in part attributed the rupiah's rise to the market's optimism over the pairing of Susilo and Yusuf Kalla, who have pledged to stamp out rampant corruption and boost foreign investment to generate high economic growth.
Burhanuddin did not mention how far the local unit would rebound, but central bank senior governor Miranda Goeltom said on a separate occasion that if the current conducive atmosphere could be maintained, the rupiah could reach 8,300, especially if the election resulted in a credible government.
The 2004 state budget targets an exchange rate of 8,600 for the rupiah against the dollar.
The strong showing of the rupiah could prove beneficial in easing inflationary pressure, with Burhanuddin betting on meeting the central bank's target range of 5.5 to 6.5 percent.
"The target should remain achievable if we can retain current stability until the year end," Burhanuddin said.
Inflation had reached 3.29 percent as of June, the latest data from the Central Statistics Agency (BPS) showed.
Benign inflation bodes well with the central bank's cautious approach toward lowering its benchmark interest rates. Meanwhile, Bank Indonesia announced on Wednesday that its benchmark interest rate increased slightly to 7.37 percent from a previous 7.34 percent.
Meanwhile in the stock market, the stock index went up by 0.4 percent on the day.
The Composite Index ended up 3.409 points at 771.66 points at Tuesday's closing. The index jumped 3.1 percent on Tuesday, one day after the election.