Rupiah to settle at 2,550-2,600: Lehman
Rupiah to settle at 2,550-2,600: Lehman
JAKARTA (JP): Lehman Brothers' chief economist on Southeast
Asia, Arup Raha, predicted here yesterday that the rupiah would
eventually stabilize below 2,600 against the U.S. dollar on the
back of sound economic fundamentals.
Raha predicted that the rupiah would not rebound to its
previous level of 2,450 (before the July 21 turbulence) but would
settle at a fair price of between 2,550 and 2,600.
"Based on current account and capital account reasons, I think
the rupiah will settle within that range," Raha added.
Meanwhile, Bank Indonesia governor J. Soedradjad Djiwandono
hinted yesterday that the central bank would continue to drain
short-term rupiah from the market to discourage further
speculations on the currency.
Speaking after the installation of 24 directors at state
banks, Soedradjad said the central bank would continue
stabilization efforts in its management of the supply of both
dollars and rupiah.
"Rupiah and dollar markets are two interdependent markets. If
you want to control the situation, you must handle the two. You
cannot maintain dollars, but at the same time supply rupiah,"
Soedradjad said.
Spot rupiah was stable at 2,608/2,612 at yesterday's close,
exactly the same as at the previous day's close, a dealer said.
He said there were some dollar purchases from offshore
operators in the afternoon, but a tight rupiah market limited the
upside.
The central bank yesterday maintained the three-day Bank
Indonesia Certificate (SBI) at 14.0 percent, four-to-six day at
15.0 percent, one-week at 10.0 percent, two-week at 10.5 percent,
one-month at 11.125 percent, three at 11.0, six at 11.625 and
one-year at 12.25 percent.
Soedradjad called on the public to read the current weakening
of the rupiah as a regional phenomenon.
He said the U.S. dollar strengthened against the rupiah and
all regional currencies, especially the Thai baht, the
Philippines peso, the Malaysian ringgit and the Singapore dollar.
Raha told newsmen the recent rupiah volatility was caused by
external factors, not by Indonesia's macroeconomic fundamentals.
"Our analysis shows that as far as Indonesia is concerned the
rupiah turbulence is not driven by domestic reasons but by purely
external reasons," Raha said.
"In other words, the fundamentals of the Indonesian economy
are very, very strong," he said.
He said that the weakening rupiah was not caused by the
country's economic fundamentals.
"Do you believe something has fundamentally changed in
Indonesian economy over the last month or so? The answer is no,"
Raha said.
Raha said the country's economy was driven by a robust
domestic and foreign investment which would eventually increase
the production capacity of the economy.
Although non-oil exports were a cause of concern for
Indonesia, the overall balance of payments was still healthy and
the current account deficit, which stood at 3.5 percent of gross
domestic product, was sustainable, he said.
"Lehman Brothers sees the Indonesian economy as fundamentally
sound and we are excited about the country's longer-term
prospects," Raha said.
Raha said Indonesia's strong fundamentals would prevent the
rupiah from devaluation, as happened to the Thai baht and the
Philippine peso.
Bank Indonesia has projected that the rupiah will be stable at
between 2,555 and 2,610 against the greenback.
Danareksa Securities' chief economist Rino Agung Effendi, who
was also at the conference, agreed saying the rupiah would not
even touch the upper end level of the central bank's intervention
band.
Bank Indonesia widened the dollar-rupiah intervention band on
July 11 from eight percent to twelve percent to avert speculative
attacks.
The central bank yesterday kept its intervention band at
2,378/2,682 but raised the conversion band to 2,585/2,633 from
2,575/2,623 on the previous day. (aly/rid)
Currency -- Page 11