Rupiah up on hopes of smooth election

Zakki P. Hakim, The Jakarta Post/Jakarta

The rupiah closed at a fresh nine-week high on Thursday as investors are increasingly confident that the upcoming presidential election will run smoothly.

The U.S. dollar ended lower at Rp 9,010 compared to 9,110 on Wednesday. Thursday marked the lowest close for the dollar since late July 20, when it ended at 8,975.

"Investors rushed to take a long position on the rupiah," said currency analyst Panji Irawan at Bank Mandiri.

Panji told The Jakarta Post that the market basically accepted the two presidential candidates, therefore whoever wins the Sept. 20 runoff election the market would react positively.

"Whoever wins does not matter now. More important is whether or not it will run smoothly," he said.

According to Panji, the pressure against the dollar would continue until next week, giving room for the local unit to further appreciate.

Friday could see the dollar declining to 8,900 and further down to Rp 8,800 a day after Monday's election, he said.

"Investors will not wait until after the election, as it might be too late for them to buy the rupiah," he said.

Panji went on that even if U.S. Federal Reserves increase the U.S. interest rate by 0.25 percent next Tuesday, the rupiah could still make gains amid the market's euphoria in welcoming a new government led by a president who was directly elected for the first time in Indonesia's history.

Front-runner Susilo Bambang Yudhoyono, a retired general, will contend the second round of the poll with incumbent President Megawati Soekarnoputri.

A new president is due to be sworn-in sometime in October.

Meanwhile, shares ended lower on profit-taking after an almost consistent increase since late last month.

"The index has climbed by almost 10 percent since Aug. 25 and experienced two corrections: the day of the Kuningan blast and the day before," said David Ferdinandus, president director of Anugerah Securindo Indah, referring to the terrorist bomb attack in front of the Australian Embassy last week.

The Jakarta Stock Exchange's composite index ended down 2.422 points, or 0.3 percent, at 813.064 on Thursday.

Volume stood at 706 million shares valued at Rp 606 billion (US$67.26 million).

The relatively low volume and transaction value showed that most players are still keeping their stocks on expectations of a smooth election on Monday, David said.

"If tomorrow the dollar trades below Rp 9,000, we might see the index rise significantly," said David.

Bank Central Asia fell Rp 25 or 1.2 percent to Rp 2,000 on Thursday and Bank Danamon dropped Rp 25 or 0.7 percent to Rp 3,775.

Indosat fell Rp 50 or 1.1 percent to Rp 4,350 while Astra International was down Rp 50 or 0.7 percent to Rp 6,800.