Local firms can still enter forward forex<\/p>\n
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
\nreiterated yesterday that Indonesian residents remain free to
\ndeal in forward foreign exchange transactions.<\/p>\n
\"The restrictions on forward forex deals imposed since Friday
\nevening are only effective for nonresidents,\" Soedradjad said.<\/p>\n
Speaking to journalists after attending a Monetary Council
\nmeeting, Soedradjad said the limitation for nonresidents,
\nincluding foreigners, foreign banks and foreign firms, should
\ncurb speculative U.S. dollar buying.<\/p>\n
\"The main purpose of (the limitation) is to reduce the use of
\nrupiah to speculate on the dollar. But they (nonresidents) could
\nstill enter unlimited transactions in the spot market,\"
\nSoedradjad said.<\/p>\n
In a bid to confine speculative dollar buying, Bank Indonesia,
\nthe central bank, announced Sunday it had limited forward foreign
\nexchange selling by domestic banks to nonresident clients at US$5
\nmillion per client and per bank's daily outstanding position.<\/p>\n
Forward exchange transactions are purchases or sales of
\nforeign currencies at an exchange rate established at the time of
\nthe deal but with payment and delivery at a future date.<\/p>\n
Bank Indonesia's managing director, Paul Soetopo Tjokronegoro,
\nsaid yesterday the move was aimed at reducing the impact of a
\nrapid internationalization of the rupiah and supporting the
\ngovernment's effort to maintain an orderly trend in dollar-rupiah
\nrates.<\/p>\n
The limitation on forward foreign exchange trading did not
\nhelp the rupiah in the spot market but helped bring down swap
\nrates, foreign exchange dealers said yesterday.<\/p>\n
Spot rupiah, which opened at 2,860\/2,890 against the U.S.
\ndollar, strengthened in morning trading to 2,850 but weakened in
\nthe afternoon and closed at 2,950\/2,960.<\/p>\n
The overall volume was extremely thin, dealers said.<\/p>\n
One local bank chief dealer said rupiah weakened in the spot
\nmarket because of natural strong domestic demand from corporates
\nand banks with the improved liquidity condition.<\/p>\n
The market was injected with fresh liquidity from the maturing
\nBank Indonesia Certificates (SBI) totaling Rp 914 billion (US$315
\nmillion) yesterday.<\/p>\n
Dealers said the central bank's latest move effectively curbed
\nthe sources of funds for foreign players to buy dollars.<\/p>\n
They said the move was anticipated, but ironically the market
\nwas so prepared that major offshore parties were heavily long on
\nthe forward side and failed to establish a forward offshore
\nmarket.<\/p>\n
Swap rates fell across the board as offshore parties were long
\non the forward side, relying solely on Jakarta to absorb their
\noffers and push rates down sharply.<\/p>\n
One-month swap fell to 60\/65 from 115\/120 last Friday, two to
\n100\/115 from 190\/210, three to 190\/200 from 240\/290 and six to
\n260\/280 from 340\/350 points.<\/p>\n
The chief dealer said the move was likely aimed at allowing
\nthe central bank to lower interest rates and resume liquidity
\nsupply to a market suffering from rupiah scarcity and high
\ninterest rates.<\/p>\n
\"The current tight liquidity policy has affected everyone, not
\nonly those in the banking industry and stock markets but also
\nthose in the real sector,\" he said.<\/p>\n
Share prices on the Jakarta Stock Exchange (JSX) continued to
\nweaken, dropping by 1.6 percent, with the composite index falling
\n7.993 points to close at 485.969.<\/p>\n
Securities analysts said the situation had not changed much
\nsince last week. The rates remained high and rupiah liquidity was
\nstill tight. This forced people to dump their portfolio
\ninvestment.<\/p>\n
But Pentasena Arthasentosa's stock analyst Edwin Syahruzad
\nsaid that at the present level, the downside potential for the
\nmarket was becoming limited as the average price earning ratio
\nhad declined 10.6 times.<\/p>\n
\"Every downward movement in the JSX should be considered a
\nbuying opportunity. More aggressive play on large cap stocks with
\nexcessive cash position is advised,\" Edwin said. (rid)<\/p>\n
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