Rupiah to stabilize, stocks to soar further, say analysts

The Jakarta Post, Jakarta

The rupiah, having weathered a huge shock last week following the latest bomb attack in the country, is likely to move within a narrow range this week with pressures slowly dwindling, analysts said on Sunday.

The local unit closed on a positive note last week at 9,280 per dollar after dropping to above 9,400 the day earlier just after the bombing. In the previous week, the rupiah ended at 9,278 a dollar.

"For this week, with the panic over, the rupiah I think will hover at relatively the same level," Farial Anwar of Currency Investment Management said.

"Also, this week is the last week before the election runoff, which would most likely keep investors -- except for speculators -- on the sidelines, applying a wait and see approach.

"That will keep the pressure off the rupiah. My prediction is that -- assuming that nothing extraordinary happens -- it would hover at around the 9,250-9,350 level," Farial told The Jakarta Post.

The election day, which will see President Megawati Soekarnoputri facing Susilo Bambang Yudhoyono for the 2004-2009 presidential term, is scheduled for Sept. 20.

A powerful bomb went off on Thursday in front of the Australian Embassy, which killed nine people and injured 180 others -- leaving the financial market in limbo on panic selling afterwards.

But, the rupiah staged a quick recovery the following day on optimism that police would be able to quickly solve the case and that the attack would not undermine the economy or sabotage the forthcoming presidential election.

Another analyst, who works for a foreign bank in Jakarta, echoed Anwar's forecast.

"Although I do not see any reason for the rupiah to strengthen, I do not expect it to weaken either. The dollar factor, which is unlikely to strengthen against other major currencies, will also help," he told the post.

"I thing a movement of more than Rp 200 will be very unlikely."

While the rupiah is expected to be stable, the stock index is predicted to maintain its upward trend with dealers betting the index to breach the 800-point level.

The index soared to its highest level in four months on Friday, defying concerns that the bombing would further impede the country's economic recovery.

The index dropped 4 percent right after the blast, but regained ground to close 0.8 percent lower on the same day.

It ended at 797.78 points last week, up by 1.4 percent from the previous week, with average daily transaction valued at Rp 1.08 trillion (US$116.41 million) as against Rp 865.07 billion the week before.

"We expect the index to surpass the 800 point level this week on further rebound," one stock dealer said, adding that investors would likely seek gains from undervalued banking shares.