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Berni
K Moestafa, The Jakarta Post, Jakarta
The
probable U.S. strike against Afghanistan could
block the rupiah's timid upward trend this week,
as the market geared for a long dollar position
to anticipate a backlash from radical groups
here, analysts said. Head of the debt income
section at PT Vickers Ballas Indonesia, Wiwan
Wiradjaja said market players remained wary
over the domestic reaction to an anticipated
U.S.-led military strike against Afghanistan.
"The rupiah is recovering, but will likely slip
on unexpected bad news," Wiwan told The Jakarta
Post over the weekend.
He said most players had factored in the possible
U.S. strike, but were still unsure on how that
could affect domestic security. "If calls for
a holy war (by Muslim militants) intensify after
the attack, this will have a downward impact
on the rupiah," he predicted. Local radical
groups have been staging anti-U.S protests over
the past few weeks in response to America's
planned attack against Afghanistan. A military
strike seems inevitable, as Afghanistan's Taliban
regime continues to defy demands from the West
to hand over Osama Bin Laden, the prime suspect
behind last month's terrorist attack in the
U.S. The disaster, crushing U.S consumer and
business confidence, has also left a gaping
hole in the world economy. Reflecting this grim
outlook, the rupiah has been steadily losing
ground, amounting to seven percent in value
since the attack.
Currency
dealers have said the rupiah's past rebound
after breaching the 10,000 barrier against the
U.S dollar last week, was in part due to players
cooling off from the panic that followed the
terrorist attack. Bank Indonesia stepped in
with intervention, and has said it would continue
to do so if necessary. "Trading has been relatively
thin; this should help Bank Indonesia intervention
moves," Wiwan continued. The central bank has
also been keeping a tight lid on interest rates
to absorb liquidity and ease inflationary pressure.
But stock analysts warned of fresh rupiah supplies
flooding the money market by investors dumping
shares in favor of dollars.
Dropping
export revenues subsequent to the slump in the
U.S. market, also threatened the inflow of dollar
supplies. "Fundamentally, the rupiah is undervalued,
however, given the still negative outlook, it's
unlikely it will strengthen any time soon,"
Wiwan explained. According to Wiwan, the rupiah
could hover this week between 9,700 to 9,900.
Last week, it ended trading down at 9,800 from
9,710 a week before.
A
dealer at a local securities company said regional
security uncertainties, and the absence of fresh
leads at home, could prolong the market index
fall to its fifth week. According to her, players
bow to selling pressure by the few foreign ones
dumping shares in the wake of increased radical
movements. "At this moment, investors prefer
not to hold stocks," she said. She predicted
the Jakarta Stock Exchange Composite Index may
still test the 350 level, after ending last
week down at 381.59 from 392.47 a week earlier.
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