May 18 16:45<\/p>\n
Bank Indonesia denies planning to apply foreign exchange control policy<\/p>\n
Denpasar, Bali (ANTARA News) - Bank Indonesia (BI - central bank) Governor Burhanuddin Abdullah on Thursday denied rumours that the central bank would apply a foreign exchange control policy to prevent the rupiah from weakening.<\/p>\n
"That is something impossible. Truly, we never even dreamt of doing that," he told reporters following a seminar here.<\/p>\n
The rupiah`s slide in morning trading on Thursday to Rp9,250 from Rp9.100 at Wednesday`s close was temporary because of sentiments over reports of high inflation in the United States, he said.<\/p>\n
If the central bank wanted to apply a foreign exchange control policy, it must first change the foreign exchange system in accordance with Law No. 24\/1999 on foreign exchange traffic and the rupiah`s exchange rate, he said.<\/p>\n
The law was enacted at the request of the people so the central bank needed to discuss its amendment with the House of Representatives (DPR), he said.<\/p>\n
"It is impossible to do that in the near future." he said.
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\nHe said Bank Indonesia had no plan to change the country`s foreign exchange system.
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\nThe rupiah weakened in the morning trading on Thursday mainly because of external factors, he said referring to the report on the US macro economic performance which put year-on-year inflation at 3.5 percent and month-to-month inflation at 0.6 percent.<\/p>\n
The figures exceeded the previous forecasts and made market players certain of another Fed fund rate hike, he said.<\/p>\n
"The market expectation of another interest rate hike has strengthened the US dollar. Even some have predicted that in the long run, the benchmark Fed funds rate target will be 6 percent or 6.5 percent instead of 5.25 percent," he said.
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\nThe rate now stands at 5 percent.
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\nThe envisaged change in interest rate target would no doubt narrow the discrepancy between the Fed funds rate and the BI Rate, causing the rupiah to weaken, he said. (*)<\/p>",
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