Rupiah to stabilize this week: Analyst

Rupiah to stabilize this week: Analyst

Urip Hudiono, The Jakarta Post, Jakarta

The rupiah is expected to sail through calmer waters this week,
with a chance of catching winds that will lift it to Rp 9,400
against the U.S. dollar, as the market adopts a wait-and-see
attitude on other monetary policies that might support the local
currency, analysts said.

For the local stock market, a stable outlook of for the rupiah
will be key in sustaining the upward rally it experienced last
week, on the back of sound corporate performances, as well as
less pressure from an unfavorable inflation expectation and
bearish global market trends.

Currency analyst Farial Anwar said on Sunday that forex market
players would be watching closely whether the government and the
central bank keep their word in actually implementing the
monetary policies that they had recently issued to help out the
rupiah.

"If the policies are effectively followed up and implemented,
then the rupiah's volatility will smoothen out," he said, adding
that there was a potential for the rupiah to settle somewhere at
Rp 9,400 against the greenback this week.

"The chances for the rupiah continuing to rise to the Rp
9,400 level is far higher than for it to slide down back to the
Rp 9,500 level."

The rupiah recorded an unbroken upward rally during last
week's trading, closing at Rp 9,480 per dollar last Friday, up
from Rp 9,505 last Monday. It recently collapsed, however, to a
three-year low of Rp 9,750 late last month, prompting the
government and the central bank to step in, as a weakening rupiah
could raise import costs resulting in economically crippling
inflation.

Bank Indonesia (BI) said it will continue raising its
benchmark SBI interest rate, as well as tightening the net open
position and reserve requirements of commercial banks, to soak up
any excess market liquidity that could be used to speculate on
the local currency.

The government, meanwhile, has required state oil and gas firm
PT Pertamina to fulfill its dollar needs of up to $50 million a
day for the country's oil imports -- which has largely disrupted
the country's meager forex market daily volume of only $400
million -- from BI, instead of purchasing it from the market.

If the market were to see even the slightest indication that
the policies were mere rhetoric and that monetary authorities
were easing their grip on their implementation, then the rupiah
could crumble again, Farial warned.

Stock market analyst Fendi Susiyanto of BNI Securities,
meanwhile, said the rupiah was the sole "sensitive factor" now
that could disrupt the local stock market's recently robust
performance.

Fendi explained that on the macroeconomic level, April's on-
year inflation -- which is a major factor affecting company
performance -- had fallen to 8.12 percent, from 8.81 percent the
previous month, while many corporations had in fact reported that
their first quarter performances were still on track.

Meanwhile, the downward pressure from global markets in their
anticipation of the U.S Federal Reserve's interest rate hike had
also passed.

"So the answer now lies on with rupiah, particularly on how
the government and the central bank coordinate Pertamina's dollar
demand," he said.

The Jakarta Stock Exchange Composite Index ended 1.8 percent
higher at 1068.27 points last Friday, with 1.55 billion shares
worth Rp 2 trillion being traded. This constituted a continuous
rise from last Monday's opening of 1026.52 points.

Fendi is expecting the market to be able to stay above the
1,050 level, with a possibility of even touching the 1,100 level.