Rupiah gloom to linger: Analyst
Berni K. Moestafa, The Jakarta Post, Jakarta
Thinning U.S. dollar reserves and a global economic downturn clouding the domestic outlook would likely confine the rupiah at 10,000 against the dollar this week amid possible waning intervention from Bank Indonesia, an analyst said.
PT Danareksa Sekuritas's currency and stock analyst Feri Latuhihin said he saw little hope for the rupiah to recover from its current levels in the short and medium term.
"I would say the rupiah remains stuck where it is, too much concern weighing against it," he said over the weekend.
Pessimism persist as the market believes Indonesia's economy is starting to feel the pinch of the global slowdown, according to him.
He said falling exports and foreign investors losing interest in state assets marked the fallout from this downturn.
"The government's actions to anticipate the external impact are starting to look doubtful," he added.
Coordinating Minister for the Economy, Dorodjatun Kuntjoro- Jakti promised actions, but was not planning or discussing them until this week.
Seeing the rupiah doomed at the 10,000 level, Bank Indonesia would unlikely step up its intervention moves, Feri continued.
In contrast, when the rupiah breached the 10,000 earlier this month, heavy intervention managed to pull up the unit back to 9,000 territory several times, he said.
"Now they (Bank Indonesia) prefer to reserve their foreign reserves, fearing sentiment would not improve on the rupiah," he explained.
On the positive side, he said, the market expected a smooth annual meeting of People's Consultative Assembly (MPR) this week.
"There isn't much of security or political worries that may affect the market ahead of the MPR meeting," he said.
But of another concern, he added, was the war in Afghanistan.
"Will it last throughout the Ramadhan month? This has the potential of triggering security troubles at home," he said.
Feri said the market feared resurging anti U.S. rallies in reaction to continued fighting against Afghan Muslims during Islam's holy month.
Another downside factor was the government dragging on its privatization program.
It impeded the inflow of dollar supply, and undermined the government's credibility before foreign investors, he said.
A decision to delay selling state cement company PT Semen Gresik to Mexican firm Cemex SA de CV added to negative market sentiment.
Last Friday, the rupiah closed at 10,253 down from 10,085 a week before. Feri estimated a range of between 10,200 to 10,300 for this week.
Meanwhile, the stock market's past few weeks rally started to lose steam with index ending a notch down at 387.82 last Friday. It stood at 387.85 a week earlier.
According to Feri, the stock market index was hurt by the delay in Semen Gresik sale, which was postponed to December.
Another analyst, Edhi S. Widjoyo of PT Ciptadana Securities, concurred, adding that otherwise trading had been flat.
For this week, he estimated continued flat trading that would see the index settled at around 380 points.