BI curbs inflow of short-term funds<\/p>\n
JAKARTA (JP): Bank Indonesia Governor Soedradjad Djiwandono
\nsaid yesterday that the widening of the central bank's dollar
\nbuying-and-selling band from Rp 30 to Rp 44 last week was aimed
\nat curbing the flow of short-term funds to the bank.<\/p>\n
\"The measure is also designed to further develop foreign
\nexchange trading between the banks themselves,\" Soedradjad told
\njournalists after attending a meeting of economic ministers.<\/p>\n
He said banks still preferred to deal with Bank Indonesia in
\nrelation to their obligation to maintain a net foreign position
\nof at least 25 percent of their capital and that, consequently,
\nthe central bank bore the brunt of the exchange rate risks.<\/p>\n
\"We hope the measure will develop inter-bank foreign exchange
\ntransactions. They (the banks) have freedom in trading,\"
\nSoedradjad said.<\/p>\n
He said Bank Indonesia wanted banks to deal more with each
\nother in foreign exchange transactions.<\/p>\n
\"But the latest measure to widen the dollar's exchange rate
\nputs most of the exchange rate risks on the banks themselves,\" he
\nsaid, adding that previously Bank Indonesia.<\/p>\n
Soedradjad denied suggestions that last week's measure was a
\nsurprise move, saying it was in fact the fourth time since 1992
\nthat the central bank had widened the dollar's exchange rate
\nband.<\/p>\n
Last year, Bank Indonesia widened the exchange rate band of
\nthe rupiah twice. The first rise, in January, saw the band
\nincrease from Rp 10 to Rp 20. On the second occasion, the band
\nwas raised from Rp 20 to Rp 30.<\/p>\n
The wider band provides more room to the central bank to
\nmanage monetary policy and allows for more price adjustments in
\nthe foreign exchange market to absorb often volatile short-term
\ncapital flows.<\/p>\n
The latest measure will transfer more exchange rate risks from
\nthe central bank to foreign exchange traders or speculators and
\nis therefore expected to deter short-term speculation. (vin)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-curbs-inflow-of-short-term-funds-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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