Rupiah reaches highest level since September

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.