Rupiah to gain strength this week: Sjahril
Rupiah to gain strength this week: Sjahril
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin
expressed confidence Saturday that the rupiah would strengthen
again this week after last week's plunge.
"Hopefully, after suffering from a shock (the rupiah) will
become normal again," he told reporters at the state palace after
attending a ceremony.
He reaffirmed that the rupiah's ideal level was at between Rp
6,000 to Rp 7,000 per U.S. dollar.
Sjahril said that if the rupiah weakened to below Rp 7,000 to
the dollar, the level was "unrealistic".
But market players do not seem to share Sjahril's optimism.
Traders said that the rupiah as well as other regional
currencies would maintain their downward trend this week.
"The rupiah is likely to re-test its three-month low because
the sentiment is still negative," said a trader, pointing to
domestic political uncertainty, the banking scandal and overall
regional bearishness.
"If developments in the banking sector continue to worsen, the
rupiah will surely drop pass the Rp 8,000 level," he added.
Dealers also said that trading sessions this week would be
quieter due to a longer weekend because of Tuesday's Independence
Day celebration.
The rupiah ended Friday at Rp 7,925 per dollar, compared to Rp
6,962 in the previous week. The unit plunged to a two-and-a-half
month low of Rp 8,250 per dollar on Thursday.
Dealers said that state banks intervened in the market by
purchasing rupiah, preventing it from a much more serious fall.
Traders said that the rupiah was under heavy pressure due to
fresh banking scandal revelations, political uncertainty, falling
yields as interest rates drop, and regional bearish sentiment.
The Bank Bali scandal, in which some Rp 545 billion was
quietly transferred from the bank into the account of a company
owned by businessmen affiliated to the ruling Golkar Party, has
sent tremors through the local financial and stock markets.
Reports also said that other senior government officials and a
deputy chairman of the Indonesian Bank Restructuring Agency
(IBRA) were involved.
The scandal was disclosed late last month, and the government
has yet to complete the investigation process.
"The Bank Bali scam has deteriorated confidence in the
country. The market is now watching how the government settles
the case," said economist Marie Pangestu of the Centre for
Strategic and International Studies.
"The real culprits have to be caught," she said, adding that
if the government failed to settle the case in a credible way
confidence would not return.
Another banking development that created jitters in the
financial market was the major reshuffle of the board of
directors and commissioners of Bank Internasional Indonesia
(BII), the country's largest private bank.
BII president Indra Widjaja and his father Eka Tjipta Widjaja
as the bank's chairman have to step down because they failed to
pass the central bank's "fit and proper test", reports said.
The Widjaja family controls Indonesia's second-largest
conglomerate, the Sinar Mas Group. BII is the group's financial
flagship.
A rumor that Minister of Finance Bambang Subianto had resigned
also worsened market sentiment on Friday.
But Bambang's close associate denied the rumor. "I just met
with Bambang today, and he said that he won't resign amid the
current hectic situation," he told The Jakarta Post.
The rupiah has also been hit by increasing political
uncertainty in the leadup to the upcoming November presidential
election.
The decline in the central bank benchmark interest rate to
13.03 percent last week had also contributed to a drop in the
local currency, traders said. (rei/prb)