BI Asked to Prevent Further Weakening of Rupiah

Jakarta - Economist from Samuel Sekuritas Indonesia Lana Soelistianingsih said Bank Indonesia should intervene strongly to prevent further weakening of rupiah against the US dollar. "The rupiah weakening lately was caused more by psychological pressure and Bank Indonesia could determine the rupiah value," Lana said here on Tuesday. Without strong intervention in the market by the central bank, the rupiah value would fall further, she added. A rupiah rebound would ease the market players as rupiah is easily affected by psychological pressure, she said. Investors would not sell their dollar if they see Bank Indonesia could not protect rupiah, she said. "Many investors holding dollar did not believe that Bank Indonesia has the strength to continue propping up rupiah, therefore, strong intervention by the central bank is necessary," she said. Lately the rupiah stood at a psychological level of 9,800 per US dollar, that could easily cross to the level of more than 10,000 based on experience, she added. Bank Indonesia, therefore, need to prop up rupiah to strengthen it to reach the level of at least 9,700 to recover the market confidence, she said. Rupiah is now at a difficult level with the psychological pressure, she said. She said the Indonesian foreign exchange reserves that rose 2.41 percent from 2011 to US$112.8 billion by the end of 2012, could give a positive sentiment for rupiah. "The increase in the position of the foreign exchange reserves would help strengthen rupiah," she said. The pressure on rupiah could also be reduced by cutting imports by the government, she said. (*)