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.