Rupiah may still rise on IBRA dollar-selling: Analyst

Berni K. Moestafa, The Jakarta Post, Jakarta

Dollar-selling by the Indonesian Bank Restructuring Agency (IBRA), amid slowing corporate demand for the foreign unit, may wedge the rupiah from its recent trading band this week to test the 10,000 level again, said one currency analyst.

Director at PT Bank Buana Indonesia Pardi Kendy said demand for the U.S. dollar remained high, but was likely to ease in the coming days as firms deferred their dollar purchases to next year.

At the same, IBRA's converting its dollar proceeds would give the local unit the needed boost to ascend, he said.

"There has not been much dollar-buying likely, with that many holidays until the year-end," Pardi told The Jakarta Post on Monday.

IBRA, which should have secured some Rp 3 trillion (about US$287 million) in asset sales last week, must convert its dollar proceeds into rupiah before transferring them to the state coffers.

The agency is earmarked to raise a total of Rp 27 trillion in asset sales this year to help plug a deficit in the state budget.

Last week, dollar selling by IBRA helped the rupiah strengthen to 10,020, but companies moved in to scoop the cheap dollar. At Friday's close the local unit still ended lower at 10,425, against 10,385 a week before.

Pardi added that Bank Indonesia would likely seize the momentum to release dollar supplies onto the market.

But he ruled out the possibility of heavy interventions. Pardi said Bank Indonesia would unlikely spend much for a stronger rupiah.

In previous years, he said, Bank Indonesia was often seen window-dressing the rupiah, pulling up the local unit to make it look good at the turnaround of the new year.

"The government hasn't done any window-dressing over the past two years, I don't think they'll do it this year," he said.

The market has begun to cool down over the past few days, as was evident in the narrow band that has marked the rupiah's trading pattern.

Last week's signing of the fourth letter of intent (LoI) to the International Monetary Fund (IMF) did little to impress the market.

The signing could pave the way for the disbursement of $360 million in IMF loans, but not before mid-January at the earliest.

Earlier this year, a mere remark by the IMF on Indonesia was often sufficient to swing the rupiah sharply in either direction.

However, that effect has lessened, as last July a new government took over and secured the IMF's support.

"We don't expect any nasty surprises in the short term, so that should help the rupiah," Pardi added.

He said that, at best, the rupiah could test the 9,800 level, but even then only for a short period before dollar hunters set in to erase the gains.

Mirroring the rupiah's tight trading pattern, the Jakarta Stock Exchange (JSX) Composite Index has been moving between 370 points and 380 points over the past few weeks.

The JSX index closed last week trading a notch lower at 374.69, as against 377.21 a week before.

Trading last week was cut short by a bourse holiday on Friday, and again this week on Monday and Tuesday in observance of the post-Ramadhan Idul Fitri holiday.