Rupiah soars to four-month high
JAKARTA (JP): Frenzied dollar selling on fear of a bullish rupiah at the end of the country's political battle pushed the local unit to a four-month high when it ended Monday's trading at Rp 10,230 against the U.S. dollar, experts said.
Khalil Rowter, head of fixed income research at PT Danareksa Sekuritas said players had either cut losses or taken profit from the sharp rise in the local unit.
"The market was concerned the rupiah gains would continue, so it dumped the dollar at between 11,000 to 10,500," Khalil told The Jakarta Post.
He said the rupiah was poised to become stronger if domestic political developments currently unfolding did not lead to violence.
The appointment of President Megawati Soekarnoputri on Monday marked the climax of a months-long standoff between her predecessor, Abdurrahman Wahid and legislators seeking to oust him.
The presidency was handed over to her during the Special Session of the People's Consultative Assembly (MPR), which Abdurrahman had tried to suspend but failed.
A presidential decree ordering the suspension was ignored by the Military, which had been charged with carrying out the instruction.
The rupiah made a jump to between 10,300 -10,400 from its Friday close of 11,150, on news the decree had become ineffective.
Also, fears of street violence from Abdurrahman's supporters protesting the special session failed to materialize.
"We've seen the worst ... the direction we're heading for is toward stability," Khalil continued.
He said the market's immediate focus now was on the upcoming Cabinet lineup, and the repercussions of Abdurrahman's ouster.
So far, he said, the market saw no imminent danger of chaos breaking loose in Abdurrahman's political heartland, East Java.
He also saw no reason for the International Monetary Fund (IMF) to further hold back its US$400 million loan tranche.
The IMF said it planned the loan disbursement by early September at the latest, ruling out a suggestion it was linking the loan to Indonesia's political situation.
Khalil said that with the resumption of the IMF's loan, the market expected the return of foreign investors.
"We're talking about a fresh supply of dollars coming in ... this could be in three to four months from now, meaning the rupiah gains don't stop here," he explained.
However, Khalil said that corporate dollar demand could jeopardize the rupiah's further gains.
Also, at Rp 10,000 many firms were likely to restart their debt restructuring talks, which would require them to make cash payments, thus creating more dollar demand, he added.
According to him, the rupiah may level off at between 9,750 to 10,000.
With the 2001 state budget assuming a rupiah exchange rate of Rp 9,800 per dollar, it would be difficult to sustain a more optimistic level, he said.
Chief economist at Bank Mandiri Martin Panggabean concurred with Khalil's warning of dollar hunters capping the rupiah's gains.
"Fundamentally, it's difficult for the rupiah to strengthen to below 10,000," he said.
But Bank Indonesia Governor Sjahril Sabirin said it was possible for the rupiah to drop below the 10,000 level, providing no violence ensued from the recent political developments.
"If it (the rupiah) keeps getting stronger, and assuming other monetary indicators remain under control, interest rates would drop automatically," he said.
On the stock market, investors snatched blue chips and second liners on the confidence that politics would drive the index further up, said Ahmad Subagja of PT Niaga Sekuritas.
"It was euphoria, but concern lingers over the reaction of Gus Dur's supporters," he said, referring to the former president by his popular name.
The Jakarta Stock Exchange (JSX) Composite Index surged to 470.22 on Monday trading, up from its Friday close of 460.91. (bkm)