Rupiah set to gain on dollar this year: BI

The Jakarta Post Jakarta

Despite a recent slide, the rupiah is expected to stabilize in relation to U.S. dollar in the second half of the year and head for a level below 9,000 per dollar by the end of the year, Bank Indonesia senior deputy governor Miranda S. Goeltom said on Friday.

Betting on the flows of foreign investment boosted in part by the improving global and domestic economy, "the rupiah will be on an strengthening trend within the range of 8,600-9,200," Miranda predicted.

Moreover, the recent acquisition offer for the country's third largest cigarette maker PT Hanjaya Mandala Sampoerna, and the planned US$2.6 billion debt moratorium from the Paris Club of creditor nations, should ease demand for the dollar, thus easing the pressure on the local currency, Miranda said.

Earlier this week, the world's biggest cigarette producer Philip Morris International Inc. offered to purchase a controlling stake in Sampoerna for Rp 48 trillion (about $5.1 billion).

Fauzi Ichsan, lead economist at the Standard Chartered Bank, agreed that the rupiah had a strong chance of gaining on the U.S. greenback later this year and could end at Rp 8,700 per dollar.

In addition to the debt moratorium, Fauzi said the local unit would also benefit from the disbursement of International financial aid for the tsunami-stricken areas.

In the short term however, pressure on the rupiah would remain amid uncertainty about the social impact of the recent hike in domestic fuel prices and soaring oil price, according to Fauzi.

"That's why I do not think that the rupiah will go lower than 9,100 (this semester)."

On Friday, the local unit closed unchanged at 9,363 against the dollar.