Rupiah rises to five-month high against dollar

The Jakarta Post Jakarta

The rupiah broke through on Tuesday the Rp 10,000 level against the U.S. dollar for the first time in five months, on what dealers attributed to rising confidence in a successful sale of Bank Central Asia (BCA).

The local currency jumped to a five-month high to close at Rp 9,985 against the dollar, up from Rp 10,075 the day before, marking its strongest performance since October last year.

According to dealers, the rupiah gained support from dollar- selling by state banks believed to be acting on behalf of the central bank and the Indonesian Bank Restructuring Agency.

Since the beginning of the year, the rupiah has been steadily making short gains against its U.S. counterparts over a period that has seen few political tensions surfacing.

The rupiah's breaking the key barrier of 10,000 may come as a surprise, since the central bank has been of little support through its interest rate policy, while Indonesia's huge foreign debt overhang continues to weigh against the local unit.

Bank Indonesia began reducing its benchmark rates on a steady basis, which would have meant pressure on the rupiah if market sentiment had been negative.

But this was apparently not the case, and dealers attributed it to the right signals the BCA sale process was sending to the market.

Securing a successful BCA sale is expected to entice foreign investors to return, as most have been holding back their capital amid an uncertain investment climate here. Two foreign-led consortiums remain the final bidders for BCA.

Either of the two, if selected as the winner, would bring in much-needed dollars into the market. That should hold off corporate dollar-hunters from buying, dealers said.

Other signals that buoyed the market have been positive remarks by the International Monetary Fund (IMF) and other lenders on Indonesia's economy.

The IMF has assured the market that Indonesia's monetary policy is progressing on the right track.

This year's state budget has assumed the rupiah to average 9,000 throughout the year.

More impressive than the rupiah, however, had been the steady rise of the local stock market, which has gained about 15 percent since the beginning of the year. Asian monies Page 12