Rupiah reaches highest level since September
Dadan Wijaksana, The Jakarta Post, Jakarta
The rupiah broke through the psychologically important barrier of Rp 9,000 on Monday, its highest level against the U.S. dollar since September last year, on optimism of expected dollar inflow from the sale of state assets.
The upward trend of regional currencies to the American greenback, led by the Japanese yen, also helped strengthen the local currency, analysts said.
After touching Rp 8,950 at midday, the rupiah closed at Rp 9,050, slightly higher than Rp 9,080 on Friday.
It last saw this level on Sept.12, 2001, when it reached a high of Rp 8,845.
"The expected dollar inflow from the sale (of state assets) is part of the sentiment that has encouraged the market and thus lifted the rupiah," Standard Chartered Bank economist Fauzi Ichsan told The Jakarta Post.
The government sold an 8.1 percent stake in state-owned international telecommunications firm PT Indosat over the weekend for $110 million as part of this year's privatization program.
Meanwhile, the dollar plunged against the yen, falling to a new low for the year of 125.53 yen from a level of 127.62, following news that the Japanese government was to take action to stem the yen's current rise.
Fauzi said that when the rupiah passed the Rp 9,000 level there was strong pressure for profit taking as corporations rushed in to buy dollars to repay foreign debts, while investors were also concerned with reports that the government might delay its planned Bank Niaga sale.
The Indonesian Bank Restructuring Agency (IBRA) announced on Monday that it might back down from its plan to divest 51 percent of its shares in Bank Niaga due to low bids.
"Profit taking, coupled with concerns over the Niaga sale process, brought the rupiah back above Rp 9,000," Fauzi said.
Since the start of the year, the rupiah has gained some 15 percent.
This year's state budget assumed the rupiah to average at Rp 9,000 to the dollar.
Fauzi was optimistic that the rupiah would be able to retain its strong grip on the dollar, due to improving macroeconomic indicators.
"In the near future, there's a good chance that the rupiah will break the psychologically important level of 9,000 (again)," he said.
The rupiah has been steadily rising since early this year, fueled in part by positive news that analysts attributed to the more stable political climate, relatively fewer security disturbances and progress on the economic front.
Some, however, said that because of the country's huge foreign debt, the rupiah would remain volatile as both the government and the corporate sector would need dollars to repay debts.