Rupiah strengthens 2.5% on investor, IMF optimism
Rupiah strengthens 2.5% on investor, IMF optimism
JAKARTA (JP): The rupiah soared 2.53 percent on Monday on the
back of positive comments from the International Monetary Fund
(IMF) and a rallying local stock market.
The rupiah closed higher at Rp 7,110 to the U.S. dollar,
compared to 7,295 in late trading on Friday.
Dealers said the sentiment on the local currency was not
affected by Bank of Japan's (BOJ) dollar-buying move on Monday,
which pushed down other regional currencies.
They said investors remained bullish on the rupiah following
positive remarks made by the International Monetary Fund's first
deputy managing director, Stanley Fischer, on the weekend that
the local currency had room to appreciate to around Rp 5,000
before the government might want to intervene.
Fischer also called on investors to return to Indonesia amid
improving economic and political conditions.
A dealer at a private domestic bank said Fischer's weekend
meeting with leaders of the country's top political parties, who
all vowed to remain committed to the IMF-prescribed economic
reforms, was another factor behind the bullish sentiment.
"People see that there would be no friction between the IMF
and the next government," he said.
Indonesia held general election on June 7. The nationwide
results of the elections were scheduled to be announced on
Monday, but have been delayed until next month. Provisional
results showed that the Indonesian Democratic Party of Struggle
has retained a commanding lead against the ruling Golkar Party.
The parliament is scheduled to vote for the country's next
president in November.
"The delay in the announcement didn't affect sentiment," the
dealer said, adding that investors had also been heartened by the
peaceful elections.
However, he said the rupiah did weaken to Rp 7,325 in morning
trading. But as Hong Kong investors started to buy into the
currency, sentiment on the rupiah turned around, sending the
currency as high as Rp 7,080. It settled down at Rp 7,110 in late
trading as people took a short covering, the dealer said.
Dealers said the bullishness of the rupiah would continue with
a near-term target of around the Rp 7,000 level.
"It's only a matter of time for the rupiah to reach the Rp
7,000 level," the dealer said.
"The government needs only to maintain the current sentiment,"
he said.
"If there's nothing serious, the Rp 7,000 level can be
achieved on the following day."
Dealers also said positive sentiment in the rupiah was buoyed
by a rally in the local stock market, as foreigners bought blue-
chip counters.
The Jakarta Stock Exchange Index advanced by 1.2 percent, or
8.576 points, to 716.460.
But the government may not be happy with the fast
strengthening of the rupiah.
Deputy for monetary and fiscal policy at the National
Development Planning Board (Bappenas) Sukarno W. said on Monday
that the rupiah must not appreciate "too fast" because the
country had not experienced strong export revenue from the
previous plunge of the currency.
He said the country's monetary authority should intervene if
the rupiah approached the Rp 6,000 level.
"We have yet to reap the advantage of the sharp depreciation
in the currency," he told reporters at his office.
He said it would be a pity if the authority allowed the rupiah
to immediately soar to the Rp 5,000 level because it would make
the country's exports less competitive.
The currency started to fall in August 1997 from Rp 2,450 to
the dollar to its lowest level of Rp 17,000 last year.
Despite the sharp fall in the currency, Indonesia's export
performance remained stagnant as local letters of credit were
rejected by overseas banks, and foreign buyers were discouraged
by political unrest in the country. (rei)