Sjahril says rupiah to remain floated<\/p>\n
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said
\nyesterday that the central bank has no plans to reintroduce a
\nmanaged exchange rate system to arrest the rupiah's free fall
\nagainst the U.S. dollar.<\/p>\n
The central bank governor indicated that the reintroduction of
\na managed floating rate policy and other forms of capital control
\nwere no longer effective ways of managing the national
\ncurrency.<\/p>\n
He was dismissing earlier rumors that the central bank would
\nbe forced to reinstall a managed floating rate system after the
\ncurrency came close to its historic low of Rp 17,000 to the
\ndollar on Wednesday in defiance of high domestic interest rates.<\/p>\n
The managed floating rate system was abandoned on August 14
\nlast year after a costly attempt by Thailand, Malaysia, the
\nPhilippines and Singapore to protect their currencies from
\nspeculative attacks failed.<\/p>\n
Before it was floated, movement in the rupiah's exchange rate
\nwas set within a trading band. The trading band was expanded to
\nas wide as 12 percent in July when the rupiah started to come
\nunder speculative pressure.<\/p>\n
The government decided to float the rupiah after the central
\nbank lost US$1.5 billion in efforts to protect the currency
\nbetween July 21 and August 13.<\/p>\n
Sjahril also dismissed rumors that the central bank intended
\nto impose capital controls to prevent the rupiah from sliding
\neven further.<\/p>\n
\"We will maintain an open foreign exchange regime,\" he said
\nafter signing a US$1 billion trade loan agreement with Japan Exim
\nBank.<\/p>\n
He said that the country exercised tight capital controls in
\nthe 1970s but still failed to stop capital outflow.<\/p>\n
\"People always find ways to send their money out of the
\ncountry,\" he added.<\/p>\n
He said that one way in which BI was propping up the rupiah
\nwas by providing domestic banks with the foreign exchange needed
\nto meet their foreign obligations, including trade finance
\ndebts.<\/p>\n
He declined to say at what exchange rate the banks were buying
\ndollars for, but said it would be at BIs own rate, which mirrors
\nmarket fluctuations.<\/p>\n
\"The rupiah improved slightly today,\" he said, using this as
\nevidence of the prudence of BIs decision to help the domestic
\nbanks.<\/p>\n
The rupiah closed at Rp 15,000 yesterday after strengthening
\nto as high as Rp 14,200. It was trading at Rp 2,450 to the dollar
\nin July last year.<\/p>\n
The agreement reached at the recent Frankfurt debt talks
\nobliges domestic banks to settle more than $1 billion in trade
\nfinance arrears owed to foreign banks before the country can
\nparticipate in the agreed debt relief program.<\/p>\n
Sjahril also said the central bank would continue to maintain
\nits high interest rate policy to stabilize the rupiah, despite
\nits unpopularity with the business sector and criticism from the
\nHouse of Representatives. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sjahril-says-rupiah-to-remain-floated-1447893297",
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