Rupiah to stable, index to recover some ground this week: Dealers

The Jakarta Post, Jakarta

The rupiah is expected to remain stable this week on decreasing pressure from the U.S. dollar and rising optimism over the country's economy, a dealer said.

The rupiah closed at 8,540 per dollar last week, slightly lower than the previous week's close of 8,520. This, according to a currency dealer at a foreign bank, marked the return of confidence in the local currency, which lost much ground two weeks ago on the back of the U.S. dollar's rise against regional currencies.

"With the pressure from the dollar easing, investors are now looking at the macroeconomic fundamentals again. Recent positive shows on the inflation and export fronts provide the latest evidence that our fundamentals remain sound," he told The Jakarta Post.

The Central Statistics Agency (BPS) reported last week that inflation continued to ease with the July consumer price index rising by only 0.03 percent from June, bringing the January-July inflation figure to a mere 1.29 percent, compared to the government's full year target of 9 percent. On an annualized basis, the inflation rate stood at 5.79 percent in July, lower than the 6.62 percent recorded the previous month.

More encouraging news was that exports in June jumped to a three-year high of US$5.28 billion.

Higher revenue from exports means that companies will have more financial resources to expand production, and this in turn could lead to more jobs.

"Also, a good export performance means higher international reserves on our side, providing Bank Indonesia with enough funds to safeguard the rupiah," the dealer said.

The country's international reserves currently stand at around $34 billion.

Adding to the positive sentiment is the expectation of capital inflows from investors eyeing local assets offered by the Indonesian Bank Restructuring Agency (IBRA).

IBRA is expected to soon launch tenders for a number of assets formerly owned by the country's business tycoons and conglomerates, including the Texmaco Group.

"All these will support the rupiah in stabilizing at the current level, with a tendency to strengthen," he added.

A stable rupiah would help the index rebound from its two-week fall, according to a stockbroker with a local brokerage firm.

"A stable rupiah will provide a good chance for the index to stage a recovery from its slump over the last two weeks. I think a level in the 510s will be achievable this week," the broker said.

The Jakarta composite index ended at 508.70 last week, down 0.2 percent from the previous week.

"The rupiah has now stabilized. There is no reason for the index not to get back on its upward trend in the near future," she added.