Rupiah weakens, but remains 'within range'

Rupiah weakens, but remains 'within range'

Dadan Wijaksana, The Jakarta Post, Jakarta

The rupiah fell to Rp 8,320 against the U.S. dollar on Friday,
the lowest rate since early June as investors cashed in gains
from the recent rise in the currency, traders said.

The move was also driven by the strengthening of the dollar
against major currencies in the region following positive
assessment of the U.S. economy from Federal Reserve Chairman Alan
Greenspan.

From January to May, the rupiah rapidly rose against the
greenback, mainly due to the global weakening of the dollar
against most major currencies. The strengthening of the rupiah
helped create a benign inflation environment in the country,
which in turn provided opportunity for the central bank to cut
down its benchmark interest rate. Together, these developments
created a much more stable macroeconomic environment.

Two weeks ago, the rupiah reached its peak of around Rp 8,185
per dollar.

Bank Indonesia Governor Burhanuddin Abdullah said that the
central bank was still comfortable with the recent decline in the
rupiah.

"It's still within our (target) range," he told reporters,
adding that the decline would not hurt the country's overall
economic performance this year.

The central bank is targeting the rupiah to hover between Rp
8,500 to Rp 9,000 this year.

"There is no need to worry -- it's a normal market mechanism
in which a high expectation of an economic rebound (in the U.S.)
is reflected in the stronger currency (dollar). It happens across
the region," said Aslim Tadjudin, Bank Indonesia deputy of
monetary affairs.

Indeed, during the past couple of weeks, some currencies in
the Asian region have been weakening against the U.S. dollar
after rising rapidly during the past few months. Some analysts
said the move was a sign that central bankers in the region had
been worried that the sharp rise in their currencies would
eventually hurt exports, particularly as the Chinese yuan --
which is pegged to the dollar -- became relatively weaker against
other units.