Rupiah to remain firm this week
Dadan Wijaksana, The Jakarta Post, Jakarta
The impressive showing of the rupiah against the dollar would likely continue this week amid continued positive sentiment in the market, an analyst said, predicting it could even break through the Rp 8,500 level.
The rupiah closed at Rp 8,700 against the American greenback last week, the strongest performance since September last year, as against Rp 8,950 in the previous week's closing.
That came as a result of the market participants cutting their long-dollar positions and local exporters unloading part of their dollar earnings.
Those long on dollars sold at a loss and local exporters exchanged dollars into rupiah for fear that the U.S. currency would continue to decline.
"I think the rupiah will continue to strengthen next week. Although news of the Bank Niaga sale progress is not so good, the market is still keen to sell dollars," a noted analyst at an European bank told The Jakarta Post over the weekend.
The government is set to cancel the planned sale of Niaga through strategic sales, as the prices offered by the two remaining consortia, each led by ANZ Banking Groups Ltd. and Malaysia-based Commerce Holding-Assets Bhd., are considered too low.
The powerful Financial Sector Policy Committee, which consists of all the ministers in charge of economic affairs, is scheduled to announce its final decision on the medium-sized bank today (Monday).
Analysts said the government is likely to sell the 51 percent stake of the bank to the capital market through a private placement.
FSPC oversees the sale of assets and debts restructuring under the Indonesian Bank Restructuring Agency (IBRA) worth more than Rp 1 trillion.
The cancellation risks criticism from the International Monetary Fund (IMF), which has recommended the sale of the bank.
Despite the risk, the strong optimism over the country's economy and bearish sentiments towards the dollar would continue to underpin the rupiah's strength, the analyst added.
Nevertheless, he warned of a sharp correction of the rupiah should the government fail to use the current good momentum to improve the country's economic fundamentals.
"So far, the real sector has not recovered yet and the approved foreign direct investment in the country dropped 88 percent during the first quarter. These have to be improved or else the rupiah's movement would not be maintained," he said.
Meanwhile in the stock market, the Composite Index is expected to maintain its upward trend this week, in line with the rupiah's strong performance, a stock dealer with a local brokerage said.
"Thanks to the rupiah's movement against the dollar, the index will retain its momentum next week," she told the post.
After a sharp decline two weeks ago, the index recovered last week to close at 530.8 points, or close to five percent higher than the week before.
Daily volume averaged 861 million shares valued at Rp 534.3 billion compared to the previous week's 741.6 million shares valued at Rp 654.4 billion.
State telecommunication firm Telkom gained Rp 225 rupiah over the week to close at Rp 4,075 while state international call operator Indosat closed Rp 150 higher at Rp 11,750.
Cigarette maker Sampoerna was up Rp 400 over the week at Rp 4,575 while rival Gudang Garam rose Rp 700 rupiah to Rp 10,850.