Bank Indonesia Reduces Spot Interventions, Now at 30 Per Cent

Bank Indonesia (BI) has reduced its use of interventions through spot transactions, with its share now at approximately 3ly 30 per cent of total interventions conducted.

BI Governor Destry Damayanti stated that the reduction in spot interventions is due to the instrument being deemed more expensive, as BI now focuses on expanding the use of other instruments such as Domestic Non-Deliverable Forward (DNDF) and Non-Deliverable Forward (NDF).

“We have significantly reduced expensive interventions. Those expensive interventions are conducted through the spot market. Spot transactions now only account for about 30 per cent of the total interventions we perform,” Destry said during a working meeting with Commission XI of the Indonesian House of Representatives (DPR RI) in Jakarta on Monday.

In spot transactions, BI conducts foreign exchange (forex) transactions directly in the market to dampen pressure on the rupiah. Unlike spot transactions, DNDF and NDF are foreign exchange derivative instruments where settlement is not conducted through the direct delivery of US dollars.

Consequently, the use of these instruments allows BI to stabilise the exchange rate without relying on direct US dollar transactions to the same extent as spot interventions.

Destry explained that the increasing development of DNDF and NDF has proven to be more effective in maintaining the stability of the rupiah exchange rate.