Sjahril upbeat about rupiah

JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on Tuesday that the rupiah would continue to strengthen until the end of the year amid signs of improvements in the economy.

"I'm optimistic that the rupiah will at least hold at the current level," he told reporters following a meeting with President B.J. Habibie.

He explained that various factors, including politics would continue to cause fluctuations in the exchange rate against the U.S. dollar, but the increasing credibility of the government's economic reform program and signs of improvement in the economy would offset any negative factors.

The country is scheduled to hold a special session of the People's Consultative Assembly (MPR), the country's top policy- making body, from Nov. 10 to Nov. 13 to set the date for next year's general election and adopt other measures to accelerate the democratization process.

"There will still be fluctuations... but the trend toward a steady appreciation of the rupiah is there," he said.

The rupiah has appreciated by about 40 percent since late last month.

The currency remained flat at Rp 7,400 to the dollar on Tuesday; dealers said there were few fresh incentives in the market.

Sjahril declined to give any ideal level for the currency, saying, "I don't have an ideal target. If it (the rupiah) can hold on to the current level I'll be happy, and if it can strengthen a little more I will be even happier."

Sjahril said last week that the rupiah could strengthen to between Rp 6,000 and Rp 6,500 by the end of the year.

The government had earlier targeted the currency to be at Rp 10,000 by the end of the year.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita made a controversial statement last week when he said that the ideal level of the rupiah was between 7,000 and 8,000 to maintain the country's export competitiveness.

The comment caused a sharp reverse in the upward trend in the currency on Thursday but the rupiah has since strengthened again.

Sjahril said that a further strengthening of the rupiah from the current level would hurt exporters only temporarily as they would gain in the longer term from cheaper imported raw materials.

Sjahril also denied a newspaper report that the central bank was planning to reintroduce a trading band for the rupiah once the currency reached a certain level.

"We have no plans in that direction. With the current system, the rupiah has managed to strengthen and hopefully it can strengthen further," he said.

The government abandoned the trading band in August last year after a massive amount of the country's forex reserves were used up trying to keep the rupiah in the targeted trading range.

Sjahril, however, added that the central bank was studying various alternatives to the current free float system.

He also said that Bank Indonesia would continue to improve the country's forex monitoring system, including by improving the net open position of commercial banks.

Separately, the central bank announced on Tuesday that Indonesia's net international reserves increased by US$64.9 million to $13.9 billion in the week ending Oct. 23 from $13.8 billion in the previous week.

The increase resulted from foreign loan disbursements and foreign exchange revenue from the export of oil and natural gas, the central bank said in a statement.

It added that the reserve level was above the $11.67 billion minimum level set by the International Monetary Fund. (rei)