Rupiah the strongest in 7 years on foreign capital

JAKARTA: Rupiah exchange rate broke the highest in 7 years against US dollar and continues to appreciate this year compared to last years performance.Based on Bloomberg data, IDR strengthened 0.2% to IDR8,508 level per US$, the strongest level since March 2004, in the yesterdays trading in Jakarta.The IDR appreciation was along with optimism of Europe Union for providing additional bailout for Egypt leading to loss concern over the continuing debt crisis and reduced US$ demand.However, Jakarta Composite Index, Indonesias stock benchmark, slumped by 0.26% or 9.82 points to 3,834.20 from 3,844.02 in the closing session at the end of last week.Out of 406 stocks calculated in the index, 75 stocks strengthened, 164 stocks weakened, and other 225 remained stagnant.The declining index was dragged down by negative contribution from Bank Rakyat Indonesia with 4.13 points, then Perusahaan Gas Negara with 3.57 points, Bank Mandiri with 2.72 points, and Telekomunikasi Indonesia with 2.37 points.Nevertheless, the positive sentiment from IDRs appreciation will provide great impact for the index in todays trading, while keep watching commodity sector stocks that are predicted to weaken, as informed by an analyst of PT Indo Premier Securities Ikhsan Binarto.IDR is estimated to climb 7%-8% against US$ this year or a 4.4% higher than last years level, as predicted by Bank Mandiri Economist Head Destry Damayanti. The strengthening is relatively stable considering on greater quality of foreign fund inflow into Indonesia.In addition, foreign investors tend to prefer foreign direct investment (FDI) to invest in real sector than portfolio as bond, Bank Indonesia certificate (SBI), and or shares.Based Bank Indonesia data, in March FDI value was higher by US$10.7 billion than portfolio investment value by US$7.8 billion.On the other hand, Bank Indonesia prefers still stimulating the increase of FDI value to maintaining the capital. He also projects for IDR to strengthen to IDR8,400 per US$ this year.Destrys estimation is along with Bank Indonesias projection that the currency will stay at the strongest level this year. But, there is possibility next year for IDRs exchange rate to be depreciated in line with less foreign fund inflow into Indonesia.Considering on strengthening trend of IDRs exchange rate, General Chairman of Indonesia Fishery Entrepreneurs Association Herwindo urged Bank Indonesia to do action.There is no benefit for exporters when the IDR strengthens because the price of fish from Indonesia shall be expensive leading to uncompetitive price in global market.Moreover, the strengthening of IDR gives bad impact for coffee exporters considering on quite high price of coffee in the export market.At the same time, price index in Indonesia goes higher than export prices. Amidst the dilemmatic situation, coffee producers sometimes closed the coffee contract at low price level.(T01/NOM)