BI could double intervention in forex market<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia (BI) said it was ready to double the volume of
\nits intervention in the foreign exchange market, in an apparent
\nemergency move to defend the rupiah from the impact of the war
\nraging in Afghanistan.<\/p>\n
Bank Indonesia governor Sjahril Sabirin said on Wednesday the
\ncentral bank would proceed with interventionist measures as they
\nshowed positive results.<\/p>\n
\"BI, therefore, may double the amount of funds needed for the
\nintervention effort, to speed up the strengthening of the
\nrupiah,\" he was quoted as saying by AFX-Asia newswires. He did
\nnot reveal the value of the central bank's previous intervention.<\/p>\n
Without further intervention, he said, the rupiah would extend
\nits downward fall.<\/p>\n
According to him, aggressive moves are necessary because the
\nrupiah is undervalued.<\/p>\n
Sjahril said earlier that the rupiah's fundamental value
\nranged between 7,500 to 8,000 against the U.S. dollar.<\/p>\n
The local unit was still trading below 10,000 on Wednesday,
\nthough slightly stronger than it was on Monday.<\/p>\n
That day, the rupiah tumbled to 10,500 as the market reacted
\nto the U.S-led attack against Afghanistan on Sunday night.<\/p>\n
The rupiah recovered to 9,980 late Wednesday due to what some
\nbelieved was dollar selling by state banks acting on behalf of
\nBank Indonesia.<\/p>\n
Sjahril said earlier that the central bank had adequate
\nforeign exchange reserves to back up further intervention.<\/p>\n
Bank Indonesia said its foreign exchange reserves as of last
\nFriday stood at US$28.952 billion, or slightly down from $28.957
\nbillion a week earlier.<\/p>\n
Sjahril's statements follow Minister of Finance Boediono
\nsaying earlier this week that more incursions into the money
\nmarket had become ineffective.<\/p>\n
Uncertainties on the global front, compounded by anti-U.S.
\nrallies at home, gave way to speculation against the rupiah.<\/p>\n
The global economic outlook worsened from bleak to hopeless
\nafter last month's terrorist attacks in the U.S.<\/p>\n
In the face of this, the government promised emergency
\nmeasures to ease the impact of a prolonged global economic slump
\nbut has thus far remained silent about actions being adopted to
\nrevitalize the domestic economy.<\/p>\n
It has ruled out a fiscal stimulus package due to this and
\nnext year's tight state budget.<\/p>\n
Boediono, however, suggested raising development spending for
\nrural economies.<\/p>\n
\"From the (budget's) spending side, we can direct limited
\nstimulus, though not for large (industry) sectors,\" he said prior
\nto a meeting with the House of Representatives' state budget
\ncommission.<\/p>\n
Boediono said Indonesia's economy would benefit more from a
\nmultiplier effect injected through rural economies.<\/p>\n
\"One rupiah in the hands of small income groups usually
\ncirculates faster at home than if we spend it on imports,\" he
\nexplained.<\/p>\n
Elsewhere, State Minister for National Development Planning
\nKwik Kian Gie said the government was too poor for a fiscal
\nstimulus package.<\/p>\n
\"The best we can do is for the government to become more
\nefficient,\" he said.<\/p>\n
The country's economy would have to rely on industries with a
\nhealthy local market share for stimulating growth, he added.<\/p>",
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