Rupiah increases to reach nine-month high

JAKARTA (JP): Confirming growing confidence in the next Cabinet lineup, the rupiah spurred to its nine month high supported by state banks dollar selling on Tuesday trading.

Dealers said that dollar selling continued on fear of a bullish rupiah once President Megawati Soekarnoputri reveals her new Cabinet. The announcement is slated for Thursday.

"People long in dollars have begun to cut losses," said a currency dealer at a foreign bank.

State banks, whom many believe had acted on behalf of Bank Indonesia, also released their dollars on Tuesday, he said.

This has helped propelled the rupiah to its nine-month high at 9,350 against the U.S dollar compared to 9,470 the day before.

The stronger rupiah comes amid no clear picture over the next Cabinet lineup, analysts say must ensure political and economic stability.

Megawati should have announced her Cabinet last Friday, but backtracked on fear of making too hasty choices.

"The postponement disappointed the market, but still the rupiah gained on Friday," the dealer continued.

He said Bank Indonesia intervention through state banks on that day had helped swung the market mood back into optimism.

Fueling this confidence was the market belief that the rupiah could reach 9,000 and even break that level.

"The 9,000 has become a magic figure, the market seems to be moving in that direction," he explained.

Also in the past few days, he said repatriation of foreign funds boosted local dollar supply.

"People who have parked their money abroad feel better about the political climate, they think it's safe to return now," he said.

But albeit the stronger rupiah, Bank Indonesia dismissed hopes of lowering interest rates just yet.

The central bank said that until it saw concrete improvements in the country's economy, interest rates would remain tight.(bkm)