Rupiah likely to remain steady after last week rally: Analysts
The Jakarta Post, Jakarta
After a sturdy rally that saw the rupiah almost break through the Rp 9,000 level against the dollar last week, the local unit will likely remain at present levels in the absence of central bank intervention and on stronger dollar demand, analysts said.
State-owned Danareksa Securities currency and stock analyst Ferry Latuhihin said it was unlikely that the rupiah would break through into 8,000 territory despite positive market sentiment overall.
"Bank Indonesia is interested in not only keeping the rupiah strong, but keeping it stable as well," Ferry said. "For now, the central bank is satisfied with keeping the rupiah at its current level, which will reduce its volatility."
Last week, the rupiah made a run for 8,000 territory for the first time since the Oct. 12 Bali bombing sent it nose-diving to 9,300 against the U.S. dollar.
Between mid-October and earlier this month, the local unit stabilized at around 9,200 to the greenback. But over the past six trading days, the rupiah reversed its earlier losses to end last Friday's trading at 9,035, down from 9,195 a week earlier.
Analysts have attributed the sharp gains to local companies purchasing the unit to pay rupiah holiday allowances ahead of Idul Fitri and Christmas next month.
Moreover, Ferry said, the rupiah was benefiting from a weaker dollar vis-a-vis regional currencies. The dollar came under pressure as a result of the U.S. Federal Reserve cutting its key rates, which have renewed concerns about the speed of America's economic recovery.
On the domestic front, the local unit has been benefiting from progress in the Bali bomb probe, which, according to Ferry, had satisfied market expectations.
"It (the probe) has been sending good signals to the market, showing that the authorities have become serious in dealing with terrorists," he said. "If this trend continues, it'll definitely be helpful for the rupiah."
Another analyst also shared Ferry's view, predicting that returning strong corporate dollar demand would peg the rupiah at current levels.
"Over the past couple of weeks, the rupiah has been moving relatively steadily. The trend will likely continue this week unless some news, either good or bad, emerges and stirs market reaction," the analyst at a local bank said last Friday.
Both analysts, however, added that news of the recent sale of a 51 percent stake in Bank Niaga to a Malaysian investor had done little to bolster the rupiah.
The Indonesian Bank Restructuring Agency (IBRA) sold its stake in Bank Niaga to Malaysia's leading financial group, Commerce Asset-Holding Berhad (CAHB), for Rp 1.05 trillion (about US$116 million). CAHB is expected to pay the purchase price by Monday of next week,
While positive news like the Bank Niaga sale has eased pressure on the rupiah, it would not be enough to outweigh market demand for the dollar, the analyst said.
"Importers would start gathering dollars to import goods to meet rising demand for consumer goods ahead of Lebaran," he said, referring to the post-fasting month holiday.
Companies with foreign debts are also seen eying the dollar for debt repayments toward the year's end.
On the stock market, the Jakarta Stock Exchange Composite Index (JSX) will likely remain buoyed by the nine-month high earnings of state telecommunications company PT Telkom, according to a stock dealer.
"Telkom's news, coupled with regional market movements, will drive the index up. But the increase will not be as much as last week," she said, adding that global markets have reacted positively to Iraq's willingness to accept a United Nation's resolution on arms inspection.
Telkom's nine month net profit more than doubled to Rp 7.57 trillion over the same period last year. This, however, was primarily due to its sale of a stake in its cellular phone unit to a Singaporean investor.