Rupiah to remain stable, stock market to weaken

Zakki Hakim, The Jakarta Post, Jakarta

The rupiah is expected to remain stable this week, despite the bomb blast at the Jakarta Soekarno-Hatta International Airport, a currency analyst said Sunday.

Farial Anwar, of Currency Investment Management, told The Jakarta Post that the terrorist attack would have little effect on the rupiah as the market was used to such incidents.

He said the attacks in Bali last October, which killed more than 200 people, had only put pressure on the market for two days.

"I think the rupiah will remain stable."

The rupiah last week closed at Rp 8,740 to the U.S. dollar.

He said the market would be mostly affected by the supply- demand factor.

Farial said a positive factor for the rupiah next week was the planned sale of the government's stake in Bank Danamon. Potential investors would exchange U.S. dollars for rupiah, strengthening the local unit.

He said the central bank was also likely to intervene in the currency market if the rupiah was under pressure, in reference to last week's statement by Bank Indonesia Governor Sjahril Sabirin that the central bank was keen to maintain monetary stability.

Farial said the stability of the rupiah would also be helped by weak sentiment towards the U.S. dollar, despite the end of the relatively short war in Iraq.

"Therefore we can expect no external pressure that could depreciate the rupiah," he said.

Farial said the rupiah could further strengthen to around Rp 8,500 to the U.S. dollar in the near future.

However, he said profit taking by stock market investors could put pressure on the local unit.

Meanwhile, PT Mandiri Sekuritas stock analyst Zulfikar said the Jakarta Stock Exchange composite index would likely fall this week as investors continued taking profit over recent gains.

Last week, the stock market dropped 1.98 percent to close at 435.04 amid profit taking activities.

Zulfikar said the index could fall between 410 points to 415 points in the next couple of weeks.

He said that investors would stay away from the market due to the lack of fresh leads.

He said Sunday's bomb blast would become a negative factor, but was not expected to cause serious damage to the market.