Rupiah 'still has leeway' to advance to 6,000 level

Rupiah 'still has leeway' to advance to 6,000 level

JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on
Friday that he was upbeat that the rupiah would still be able to
advance to a level between 6,000 and 6,500 against the U.S.
dollar, despite the currency's retreat in the last two days.

The central bank chief said he believed a stronger rupiah
would not hurt the competitiveness of the country's exports and
said it would instead cut exporters's expenditure on imported-raw
materials.

"(Although) it is difficult to estimate an ideal level for the
rupiah-dollar rate, I believe the currency will still be able to
appreciate to 6,000 or 6,500," he told journalists following a
meeting of the government's economic resilience council at the
State Guest House.

The central bank governor said the rupiah was still
undervalued.

His remarks follow a controversial statement made by
Coordinating Minister for Economy, Finance and Industry Ginandjar
Kartasasmita on Wednesday.

Ginandjar said the rupiah's ideal level against the dollar
should be between 7,000 and 8,000 to maintain competitiveness of
the country's exports.

Sjahril said that a stronger rupiah would result in a
significant reduction in expenditure on imported raw materials,
which would in turn lower their overall production costs.

"At a level of between Rp 6,000 and Rp 6,500, exporters will
be able to buy raw materials at cheaper prices," he said.

The rupiah, which hit an eight month high of 7,150 against the
dollar on Wednesday, continued falling on Friday to close at
7,850. The fall has been partially attributed to the market's
negative reaction to Ginandjar's statement.

"I think market sentiment on the rupiah is still negative so
people will tend to buy more dollars from the market," a chief
dealer with a local private bank said.

Dealers said that like other regional currencies, the rupiah
also dropped as a result of a weakening in the Japanese yen
against the dollar. The yen closed lower at 119.12 against the
U.S. dollar after trading in Tokyo on Friday.

Money market analysts said that dollar selling by state banks
in morning and afternoon trading prevented the rupiah from
breaking through the 8,000 level.

"If there was no dollar selling by state banks, the rupiah
might have broken through the 8,000 level," another dealer said.

Bank Indonesia director Achyar Iljas said separately on Friday
that the government would not intervene in the market to prop up
the rupiah against the dollar.

But Sjahril admitted on Friday that the central bank had sold
dollars over the past few days to buttress the rupiah's position.

"One day we sold $1 million, the next day about $5 million and
once we sold $20 million," he said.

Although the central bank remains optimistic about prospects
for the rupiah, most currency dealers said that the outlook would
be more bearish in the days ahead.

They said prospects for the rupiah would remain bleak in the
run-up to the special session of the People's Consultative
Assembly (MPR), which is scheduled for Nov. 10 to Nov. 13 this
year.

Like the rupiah, share prices in the Jakarta stock Exchange
(JSX) fell 1 percent on Friday, with the main price gauge
dropping 3.38 points to 313.45 on a total turnover of 167.84
million shares valued at Rp 233.16 billion.

Head of research at Mashill Jaya Securities Edhi S. Widjojo
said the rupiah's decline had forced most investors to sell
stocks of corporations with large debts denominated in foreign
currencies.

"With a declining rupiah, companies will face greater
difficulty servicing their debts ... so investors will be
inclined to sell," he said. (prb/aly)