Rupiah seen to slightly strengthen
Dadan Wijaksana, The Jakarta Post, Jakarta
The continued upward movement of regional currencies against the U.S. dollar, coupled with some domestic good news, would drive the rupiah slightly stronger this week, although the movement would be limited to a narrow range, an analyst said.
"There are signs indicating that the rupiah is likely to strengthen," Pardi Kendy told The Jakarta Post over the weekend.
Pardi, who is also Bank Buana's Director, said he based his assumption on the impact of last week's move by the U.S. Federal Reserve to cut its benchmark interest rate, which renewed concerns on the outlook for the U.S. economy. The Fed cut the rate by half a point to 1.25 percent.
"The Fed's cut drove most of the regional currencies up against the dollar, and the rupiah followed suit. I think this week the trend will be the same," he said.
The local currency ended the week at Rp 9,195 against the dollar, up slightly from the previous week's closing of Rp 9,225 with the rise attributed by analysts to the Fed's rate cut.
Aside from external factors, the rupiah is expected also to be supported by several good news domestically, including the breakthrough in the Bali bombing investigation.
The police have said that a native Indonesian had admitted involvement in the deadly Bali bombing, which killed close to 200 people, mostly foreign tourists, and left hundreds of others injured.
According to a local dealer, the announcement would send positive signals to the market that the government was serious in dealing with terrorists.
"This is definitely good news for the rupiah," he told the Post.
Other news that will potentially ignite the local unit was the progress of the sale of a 42 percent stake in state-owned international call operator Indosat and the divestment of Bank Niaga, he said.
While the Indosat sale had entered the due diligence process, the Indonesian Bank Restructuring Agency (IBRA) signed Friday the agreement with Malaysia's Commerce Assets Holding Bhd for the sale of a 51 percent stake in Bank Niaga.
For Indosat, five bidders have been declared eligible to join the next stage of the bidding process as the government is hoping to raise between Rp 4 trillion to Rp 5 trillion from the sale.
Meanwhile in the stock market, more news on the privatization and divestment program could help the Composite Index rebound a bit from a 1.5 percent decline last week.
The index closed at 365.70, or 5.432 points lower than 371.14 the week before, mostly due to regional factors.
Heavy selling of select blue chips led to stock falls in many regional markets, following Wall Street's decline overnight.
"The market will react positively this week on news of economic reform agenda, including Indosat," a dealer said, adding that Jakarta shares would no longer follow the regional trend this week because they were already undervalued.
Daily volume last week averaged 469.6 million shares worth Rp 346.4 billion (US$37.6 million) compared with 439.18 million shares worth Rp 329.28 billion the previous week.