In­done­sian FM bullish on ru­piah tra­jec­tory

The Pak Banker - - COMPANIES/BOSS -

The In­done­sian ru­piah will strengthen this year as pol­icy mak­ers main­tain a fo­cus on macroe­co­nomic sta­bil­ity even as growth picks up, ac­cord­ing to In­done­sian Fi­nance Min­is­ter Bam­bang Brod­jone­goro.

The cur­rency should trade around the 13,500 to 13,600 a dol­lar level de­pend­ing on global con­di­tions, Brod­jone­goro said in an in­ter­view in Hong Kong on Wed­nes­day. That's more bullish than the me­dian es­ti­mate of 30 an­a­lysts sur­veyed by Bloomberg, who see the ru­piah end­ing 2016 at 14,542. The cur­rency fell 0.6 per­cent to 13,775 as of 2:28 p.m. in Jakarta, ac­cord­ing to prices from lo­cal banks.

The ru­piah has been lit­tle changed this year, out­per­form­ing all but two emerg­ing-mar­ket Asian cur­ren­cies, amid Chi­nese mar­ket tur­bu­lence and af­ter the Fed­eral Re­serve raised in­ter­est rates in De­cem­ber.

Bank In­done­sia's re­sump­tion of its eas­ing cy­cle last month has helped lure in­flows to the coun­try's sov­er­eign bonds. In­creased in­fra­struc­ture spend­ing will spur eco­nomic growth from an es­ti­mated 4.8 per­cent in 2015, Brod­jone­goro said, with­out giv­ing a fore­cast for this year.

"Al­though we al­ready see some room to speed up growth, we still put the em­pha­sis on sta­bil­ity," Brod­jone­goro said. "We al­ready see part of the hys­te­ria of a Fed rate hike has been priced in be­fore. So that's why the ru­piah has been per­form­ing well." The ru­piah's re­silience in 2016 con­trasts with its 30 per­cent plunge in the three years through 2015 amid fall­ing com­mod­ity prices, a slow­ing Chi­nese econ­omy and an­tic­i­pa­tion of tighter U.S. mon­e­tary pol­icy.

The cur­rency had been more un­der­val­ued than most of its peers and should be fairly sta­ble, ac­cord­ing to Ebury Part­ners Ltd, the mostac­cu­rate ru­piah fore­caster in Bloomberg rank­ings in the third and fourth quar­ters.

Ebury pre­dicts the cur­rency will end the year at 13,800 a dol­lar. Royal Bank of Canada sees the ru­piah weak­en­ing 12 per­cent to 15,600 a dol­lar by the end of 2016 as In­done­sia's weak trade per­for­mance sug­gest it's over­val­ued and the cen­tral bank will be re­luc­tant to cut its bench­mark rate too ag­gres­sively, Sue Trinh, head of Asian for­eignex­change strat­egy in Hong Kong, said in a re­search note on Wed­nes­day.

In­done­sian ex­ports fell for 15 months through De­cem­ber. Whether the govern­ment is able to move for­ward with ma­jor in­fra­struc­ture projects will be key to the cur­rency's per­for­mance, said Trinh. In­done­sia is due to re­lease gross do­mes­tic prod­uct fig­ures for 2015 on Fri­day.

The econ­omy ex­panded 4.8 per­cent in the three months through De­cem­ber and 4.7 per­cent last year, ac­cord­ing to me­dian es­ti­mates in a sur

vey.

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