Rupiah to remain flat this week: Analyst

Rupiah to remain flat this week: Analyst

Dadan Wijaksana, The Jakarta Post, Jakarta

The rupiah is expected to hover within a narrow range in thin
trading this week, with an absence of fresh leads both at home
and in the international market, according to an analyst.

"For the moment, there is no news that can trigger the rupiah
to move with any volatility. So I think the rupiah will be
hovering at around the same level as last week," Farial Anwar of
the Currency Management Group told The Jakarta Post over the
weekend.

Last week, the local currency closed at Rp 8,885 against the
US dollar, about the same as the previous week's close of Rp
8,830.

And provided there is no big news, positive or negative, the
trend will remain the same, Farial added.

On the domestic front, although the country's political and
economic fronts remain relatively stable, Farial said this would
not be enough to drive the currency market.

And the local currency market does anticipate moving news from
overseas, particularly with the U.S. stock market already
beginning to bounce back from recent slumps.

Farial said recent reports of hundreds of billions of dollars
worth of capital outflow from the U.S. proved to have little
impact on the dollar.

The Financial Times has reported that Saudi Arabian investors
have pulled their funds out of America for fear the U.S.
government might freeze their assets on the grounds of alleged
links with terrorist activities.

Currency speculators are also likely to wait on the sidelines,
as they remain wary of potential losses resulting from any
intervention from Bank Indonesia.

The central bank seems committed to guarding the movement of
the rupiah, Farial said.

In terms of supply and demand for dollars, the capital inflow
resulting from the sale of assets under the Indonesian Bank
Restructuring Agency (IBRA) will be enough to offset high dollar
demand from corporations, he said.

IBRA just completed the sale of Rp 135 trillion worth of
nonperforming loans, which will bring in some Rp 23.1 trillion in
revenue.

"This should be able to offset the effect of higher demand for
dollars from the corporate sector to either finance imports or
service overseas debts," Farial said.

On the Jakarta Stock Exchange, whose composite index rose 1.6
percent last week to 458.27 points, movement will still depend on
the corporate activities of blue-chip companies, an analyst said.

Stock analyst Erwinda Anggraini said that in general, the
index had the potential for further gains on the expectation of
progress in the privatization program, especially regarding
state-owned telecommunications firm PT Indosat.

In its privatization drive, the government has announced plans
to sell a 42 percent stake in Indosat through a strategic sale.

"But pressure might come from first-half financial reports
from certain companies, especially from tobacco firms, which is
worrying," Erwinda said, adding that cigarette demand had been on
the decline, which might hurt the companies' earnings.

The government's plan to increase its excise revenue target
could further hurt the tobacco companies, as they would be forced
to raise cigarette prices.

In the 2003 state budget draft, the excise tax target has been
increased to Rp 27.6 trillion, some 95 percent of which is
expected to come from tobacco firms. This compares to Rp 22.3
trillion in this year's budget.

The index ended last week ended at 458.27, up 7.29 points from
the previous week.

Daily volume averaged 616.42 million shares valued at Rp
375.74 billion (US$42.4 million), compared to the previous week's
268.66 million shares valued at Rp 258.76 billion.