Rupiah soars to four-month high

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)