Rupiah gains from peaceful election: BI

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.