Rupiah not affected by dollar plunge: Analysts
Rupiah not affected by dollar plunge: Analysts
JAKARTA (JP): Although the U.S. dollar fell against the Japanese yen to reach another post-war record low yesterday, analysts said the rupiah was holding firm and that monetary instability was unlikely in the near future.
"There should not be any reason for panic in the immediate future about the rupiah and other regional currencies," James Castle, president of investment consulting firm Business Advisory Indonesia, told The Jakarta Post yesterday.
"This is because the fall of the dollar against the yen was perceived as something that came out of developed economies rather than the emerging markets," he said.
The dollar reached a new global low yesterday, hitting 80.15 yen on the Tokyo foreign exchange market, despite greenback- supporting market intervention by the Bank of Japan.
It was quoted at 82.92-82.97 yen in afternoon trading, against 83.89-83.92 yen on the previous trading day in Japan and 83.68 yen quoted in New York late Friday.
Market developments here and in Singapore proved Castle right as the rupiah held steady at closing despite some selling during the day.
The U.S. greenback was quoted at Rp 2,231 at closing yesterday, unchanged from Friday, although it started the day at around Rp 2,233.
After a brief episode of dollar rush in the rupiah market in January following the Mexican financial crisis, Minister of Finance Mar'ie Muhammad said that the depreciation of the rupiah against the greenback would be limited to between three percent and four percent.
According to Bank Indonesia, the dollar appreciated to Rp 2,221 yesterday from Rp 2,191 on Jan. 2, while the yen rose to Rp 26.80 from Rp 22.10.
Tolerable
A foreign investment banker told the Post yesterday that all the sales of rupiah yesterday were still within the tolerable limit set by Bank Indonesia, which usually intervenes when the spot market of the local currency nears the official exchange rate.
"Nothing to worry in the immediate future. The concern should be a little further in the future, regarding Indonesia's debt payments," he said.
Although Indonesia has never once rescheduled its debts since 1967, some analysts have expressed concern about the rising yen because, they say, every time the yen goes up by one percent against the dollar, it adds $300 million or more to Indonesia's debts outstanding.
According to official figures, Indonesia's foreign debts, a majority of which are long-term government loans, totaled around $88 billion. About 40 percent of those loans are denominated in yen, with annual interest rates of between two-and-a-half and three percent.
About 15 percent of the country's 1995/1996 budget, effective as of April 1, is financed by foreign development loans.
Analysts estimate that Indonesia's current account deficit may reach $3.6 billion during this financial year and that its debt- service ratio may reach 31 percent.
Doubt
According to a report last week by U.S.-based merchant bank J.P. Morgan, foreign managers' doubt about Indonesia's ability to honor its debts was the cause of the rupiah's depreciation on the spot market last month.
"Last Friday (Friday March 31 and the end of the 1994/1995 fiscal year), the rupiah dropped to 2,238/US$, returning the depreciation rate back to 3.8 percent -- exactly the rate seen during the height of January's 'tequila fever'," the report said.
It also said: "This year, seemingly, investors have come to worry about a perceived increase in Indonesia's external debt burden brought about by the rising yen."
Castle, however, played down the likelihood of another misperception of Indonesia's fiscal strength on the part of foreign fund managers.
"Look, Indonesia has a good credit history and the government has repeatedly stressed that it will maintain its prudent fiscal policy," he said.
He also pointed out that, besides rosy projections of overall economic growth and an increasing influx of foreign capital, the country's foreign exchange reserves had increased last month.
Figures from Bank Indonesia show that, as of last month, foreign exchange reserves had risen to $13.23 billion from February's level of $12.70 billion. (hdj)