BI has sufficient forex reserves to defend rupiah

JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin emphasized on Friday that if necessary, the central bank would intervene in the currency market by selling dollars to help stabilize the rupiah during the current political instability.

Sjahril said the central bank had sufficient foreign exchange reserves to intervene in the market.

Bank Indonesia said in a press statement issued on Friday that the central bank's net forex reserves rose to US$29.5 billion as of Wednesday from $29.26 billion the previous week.

The central bank said the increase was a result of oil revenue and the inflow of foreign loans.

Bank Indonesia has said its foreign exchange reserves are above the minimum level set by the International Monetary Fund.

"The bottom line is that we will make efforts to help stabilize the rupiah," he said following Friday prayer at Bank Indonesia headquarters.

"But we will only make the intervention if we believe it will be effective. If not, we will not intervene. So it will depend on the factors affecting the rupiah.

"We will watch closely from hour to hour, and from day to day. If the intervention can prevent the rupiah from falling, we will do it. We have enough reserves."

The rupiah ended slightly higher on Friday in quiet trade, closing at Rp 9,590 to the US dollar from Rp 9,595 on Thursday.

Traders said Sjahril's comments failed to affect the market. They also claimed continuing demonstrations by supporters and critics of President Abdurrahman Wahid had no effect on the market, because they had been widely expected.

There has been growing political pressure for Abdurrahman to resign following his censure by the House of Representatives over his alleged involvement in two financial scandals.

Sjahril also said demonstrations by Abdurrahman supporters and attacks on the East Java offices of former ruling party Golkar had not seriously affected the rupiah.

"Of course, there is some effect, but it is not too big yet," he said.

But Sjahril admitted Bank Indonesia had already intervened in the market, though not to a great extent.

Bank Indonesia issued in the middle of last month a new forex ruling restricting offshore trading of the rupiah. The ruling bans onshore banks from engaging in forward transactions with offshore parties without any underlying investment purpose.

Traders said the ruling effectively stopped speculation on the rupiah and helped reduced the volatility of the local unit, although the rupiah fell to Rp 9,590 on Wednesday from Rp 9,573 the previous day as offshore banks settled their outstanding rupiah transactions with counterparties ahead of Wednesday's deadline.

But currency experts have said the new ruling is not a remedy to strengthen the rupiah because other factors are involved, including political stability, the corporate debt restructuring program and other economic reform programs.

Some $18.9 billion in corporate overseas debt will mature this year, which will add pressure to the rupiah.

Bank Indonesia has targeted the rupiah to be in the range of Rp 7,750 to Rp 8,250 against the US dollar this year.

Elsewhere, Bank Indonesia said in a statement the maximum interest rate for one-month time deposits allowed under the government's bank guarantee scheme for the period of Feb. 12 to Feb. 18 was 15.33 percent.

The central bank said the maximum interest rate for three- month, six-month, 12-month and 24-month time deposits were 15.76 percent, 15.73 percent, 15.79 percent and 16.27 percent, respectively.

Bank Indonesia said that for dollar time deposits, the maximum interest rate was 6.79 percent (for one-month deposits), 6.86 percent (three-month), 6.94 percent (six-month), 6.97 percent (12-month) and 6.92 percent (24-month).

It added that the maximum interest rate for rupiah interbank loans was 12.25 percent, and 5.35 percent for dollar interbank loans. (rei)