Rupiah to remain under pressure
Rupiah to remain under pressure
Dadan Wijaksana, The Jakarta Post, Jakarta
Following a two percent drop last week, the rupiah's roller-
coaster performance against the U.S. dollar is expected to
continue this week as the market would remain cautious, awaiting
fresh news, currency analysts said.
DBS Vickers analyst Wiwan Wiradjaja predicted the local unit
would continue to decline, saying the absence of positive market
sentiment would put additional pressure on the rupiah, already
hit by recent "unwise" statements from the monetary authority.
"The rupiah will tend to weaken this week, hovering between Rp
8,900 to Rp 9,100 while the market applies a wait and see
approach," Wiwan told The Jakarta Post on Sunday.
After reaching around Rp 8,400 midweek, the strongest level in
nine months, the rupiah fell sharply against the U.S. currency
partly because of remarks by Bank Indonesia deputy governor
Miranda Goeltom, saying the safe level for the Indonesian unit
was between Rp 8,500 and Rp 9,000.
The statement prompted a fall in the rupiah over the following
days to over Rp 9,000 per U.S. dollar.
However, thanks to Bank Indonesia intervention on Friday, the
local currency edged upwards again to close the week at Rp 8,870,
a depreciation of almost two percent compared to the previous
week's close of Rp 8,700.
Wiwan was of the opinion that such statements would have
nothing but a negative impact on the rupiah.
A dealer in a local brokerage concurred, saying that as an
official of the monetary authority, Miranda should know how
sensitive the market would be in responding to such a statement.
"Look at the damage it did. The rupiah will now find it
difficult to claw its way up again against the dollar," he told
the Post.
Also hurting the rupiah would be lingering fears of security
disturbances and confusion about the government's Bank Niaga
divestment plan.
Three bombs exploded in downtown Jakarta early on Sunday,
injuring four people. This could create a perception that the
government had difficulty in maintaining security, and would
eventually affect the rupiah in a negative way, Wiwan said,
unless the government responded as quickly as possible.
As for the Bank Niaga sale, if the government were to cancel
it, this would hurt relations with the International Monetary
Fund, which in turn would affect investor confidence in the
economy, seen as a crucial factor in helping the rupiah.
Certain top government officials had earlier suggested that
the strategic sale of the Bank Niaga stake be delayed due to the
low levels of the bids submitted.
Meanwhile, in the Jakarta stock market, the Composite Index
would likely remain flat with a strong tendency to decline due to
the uncertainties surrounding the Bank Niaga sale and the rights
issue plan of state-owned telecommunications firm PT Indosat.
"The government has to clarify the situation regarding Indosat
and Niaga, or else the players will not enter the market," a
stockbroker with a local bank said.
Last week, the index fell 3.2 percent to close at 514.09
points, compared to 530 points the week before.
Shares in state-owned telecommunications firm Telkom dropped
by Rp 125 over the week to close at Rp 3,950 per share, while
Indosat closed Rp 400 lower over the week at Rp 11,350.
Cigarette maker Sampoerna lost Rp 225 over the week at Rp
4,350 while rival Gudang Garam dropped Rp 150 over the week to Rp
10,700.
Daily volume averaged 481.34 million shares valued at Rp
386.44 billion ($43.51 million) compared to the previous week's
861 million shares valued at Rp 534.3 billion.