EXPORTS WEAKENED AS RUPIAH APPRECIATING

By Andi Abdussalam

Jakarta, Sept 22 (ANTARA) -  The rupiah's appreciation since last week  strengthening to below Rp8,950 against the green-back at the Jakarta interbank spot market on Wednesday evening has caused  concern among exporters .          Head of the Financial Division of PT Bank OCBC NISP, Suriyanto Chang said on Wednesday that the rupiah continued to appreciate and edge closer to a level below Rp8,950 per US dollar. He said the appreciation worried exporters because it could cause a problem for their products in the export market.          On Wednesday, the rupiah in the Jakarta interbank spot market traded at a range of Rp8,960-Rp8,970 against the US dollar but at the closing in the evening it strengthened further and rose to a level below Rp8,850 over active rupiah buy-ups.          Suriyanto Chang said that the rupiah inclined to appreciating due to strong incoming flow of foreign funds into the domestic market.          The rupiah on Wednesday evening rose 17 points to Rp8,943-Rp9,953 per US dollars compared to the previous day's closing at Rp8,960-Rp8,970.          Retail Banking Director of PT Bank Mega Kostaman Thayib said meanwhile that market players continued to purchase the rupiah so that it continue to appreciate and reached a level below the Rp8,950 per US dollar.          Seeing the strengthening trend of  the rupiah against the green-back,  financial market analyst Irfan Kurniawan predicted that the rupiah value would continue to remain at a stable range of Rp8,950-Rp9,000 until the year-end.          "The rupiah value at the Rp8,950 - Rp9,000 is an ideal one because it would still enable both exporters and importers to carry out their activities well, though exports at present are showing a downward trend," Irfan said on Wednesday.           Irfan who is also financial analyst of PT First Asia Capital said the value of rupiah at Rp8,945-Rp8,955 range was not too far from the Rp9,000 range. That is why the government still lets the rupiah  fluctuate within that range.          He said that the government actually wanted the rupiah value to be above the Rp9,000 level but due to the decline of its exports it let the rupiah stay below the Rp9,000 level. The present level of rupiah value only had a thin margin with the Rp9,000 level  and it did not pose too much problem to the export activities.          Exporters still could carry out their activities even if the rupiah is below Rp9,000 per US dollar. Exporters would complain and ask the government to stop the strengthening of the country's currency if it reached the Rp8,700 - Rp8,800 level.          Irfan said a value of  rupiah at that level would reduce exporters' profit as it would reduce their competitiveness in the world market.          Last week, when the rupiah appreciated and almost reached Rp8,800 per US dollar the government was forced to consult Bank Indonesia (BI/the central bank) to overcome the rupiah appreciation. The government even asked BI to maintain the rupiah value at the Rp9,000 level.          But the strong inflow of foreign capital to the domestic market posed difficulties to the central bank to carry  out an intervention to off set the rupiah and rekindle its value back to the Rp9,000 level.          "We predict that the rupiah would remain below the Rp9,000 level until the end of the year," Irfan said.         The rupiah began to show an upward trend when it edged closer to Rp8,950 per dollar at the Jakarta interbank spot market late Tuesday on active rupiah buy-ups last week.          The rupiah traded at Rp8,955-Rp8,965 per dollar compared to Rp8,995-Rp9,005 per dollar earlier at the weekend, up 40 points.          Finan Corpindo Nusa President Director Edwin Sinaga said a number of internal and external positive sentiments had raised demand for the rupiah, causing the Indonesian currency to strengthen significantly against the greenback.          One of the positive sentiments was the fact that Indonesia's global competitiveness rating rose by 10 notches to 44th among 132 countries surveyed, he said.          He said the rupiah was expected to further strengthen to a level of Rp8,900 per dollar due to the strong positive sentiments.          "We are optimistic if Bank Indonesia (BI) does not intervene in the market the rupiah will edge closer to a level of Rp8,900 per dollar," he said last week. He said the rupiah still had a great chance to further appreciate particularly because of the strengthening of Wall Street, fueled by the dollar's weakening against euro and yen.          In response to the appreciation,  BI Governor Darmin Nasution said that the present rupiah exchange rate was still competitive for the national economy compared to  those of  the currencies of neighboring countries.          "The argument that our competitiveness has declined because of the rupiah's appreciation is not valid  because the currencies of other countries have appreciated even more," he said.          He said until Friday last week the exchange rate of the rupiah was Rp8,980 against the US dollar while its yearly average is still at Rp9,130 or it has only appreciated by 4.8 percent since early this year.          "That is the same as that of Philippine Peso but is smaller than Thai Baht which is 7 percent and Malaysian ringgit 8 percent," he said.           Darmin admitted BI had bought US dollars to make the rupiah remain stable and its volatility not to big. The view of some ministers that the rupiah was no longer competitive for trade was not correct because the rupiah was not alone.          Regarding the assumption for the rupiah exchange rate in the 2011 draft budget which is set at Rp9,300 per US dollar Darmin said that  the government did not wish to weaken the rupiah but based upon the results of calculation made along with BI, the high inflation next year could lower the value of the rupiah.          "The fact is if the capital from abroad keeps flowing in certainly the rupiah will not be able to stand at that level (Rp9,300 against the US dollar)," he said.          The huge flow of foreign capital into Indonesia coupled by the depreciation of the US dollar against other currencies recently have made the rupiah value to appreciate to Rp8,900.           Several ministers however felt that the appreciation was too high and therefore could disrupt domestic industrial exports. ***2*** (T.A014/A/HAJM/19:37/a014) 22-09-2010 19:44:0