Rupiah gains slightly; BI upbeat about outlook

The Jakarta Post ,  Jakarta   |  Wed, 09/27/2006 7:59 AM

The Jakarta Post, Jakarta

The rupiah managed to break its two-day fall Tuesday to rebound slightly, following other currencies in the region that ended mostly flat against the U.S. dollar.

The rupiah nudged up 0.4 percent to Rp 9,199 against the dollar, after Monday's slide to a two-month low of Rp 9,240 on concerns of possible capital flight amid the recent decline in the country's stock market.

The dollar was flat against the Japanese yen at 116.5 on 3 p.m. Tokyo time, and also against the South Korean won at 943 won. The greenback also weakened against the Singapore dollar, but strengthened against the Indian rupee and the Philippine peso.

The rupiah's thin gain came on investors in the local currency market's profit-taking from the dollar's recent rally, as well as reassuring comments from the central bank on the rupiah's stability on continuing capital inflow. But it was despite share prices in the country continuing to fall.

The Jakarta Stock Exchange Composite Index closed down for the second straight day by 6.651 points -- or 0.44 percent -- at 1,500.105, weighed down by weaknesses in regional bourses, rather than such local factors as interest rates.

Select bank shares were mostly affected, with Bank Mandiri, the country's largest lender by assets, shedding 2 percent to Rp 2,250 and Bank Rakyat Indonesia 1 percent to Rp 4,950.

The fall in share prices also put pressure on the rupiah, as investors considered Bank Indonesia's recent rate cut to 11.25 percent -- the fourth this year -- as possibly decreasing the returns and values of rupiah-based assets.

The central bank emphasized that foreign investors have continued to buy US$7 billion in stocks, treasury bonds and central bank bills as short-term investments.

Fund managers based outside of the country have also bought more stocks than they sold over the past six days, according to the stock exchange data.

The continuing capital inflow and the fact that market movements were mostly influenced by regional markets led BI Senior Deputy Governor Miranda S. Goeltom to say the rupiah's current exchange rate was not a particular concern.

""The currencies (in the region) are now adjusting after having strengthened. The rupiah too has been strengthening, and if in the process it weakens a little, then that's still fine.""

Miranda also pointed out several positive sentiments for the rupiah, including surveys from global rating agencies that Indonesia is now more resilient against oil price shocks.

Last year's crude price surge severely affected the rupiah, as it pushed up the country's costs in dollars for fuel imports.

Dealers are forecasting the rupiah to trade at around Rp 9,200 a dollar this week on an upcoming usual end-month rise in demand for the greenback, with resistance at Rp 9,250.

The government and the central bank for the 2006 state budget expected the rupiah to average Rp 9,300 to the dollar.

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