Rupiah seen to slightly strengthen

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.