BI sells $1b to stabilize the rupiah
BI sells $1b to stabilize the rupiah
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
said yesterday that the central bank had sold US$1 billion on the
forward market to stabilize the rupiah.
That amount was much less than the Thai and Philippine central
banks sold to defend their currencies, he said.
"This smaller amount (for intervention) is because we had
taken preemptive action before the sharp depreciation of the
rupiah (against the U.S. dollar)," Soedradjad said after opening
a seminar on Islamic mutual funds.
Before intervening, the central bank widened its intervention
band from 8 percent to 12 percent to discourage speculation, he
said.
He said the bank's intervention had helped calm the jittery
market and stabilized the rupiah, which came under strong
speculative attack on July 21.
"You can see from current developments that the rupiah is
recovering and its depreciation is no longer as steep as that on
July 21," Soedradjad said.
Dealers said yesterday the rupiah was recovering against the
U.S. dollar. Spot rupiah closed at 2,570/2,575 yesterday, higher
than the previous day's close of 2,575/2,580.
Rupiah plunged to its lowest level -- 2,665 -- on July 21,
when the central bank started intervening in the market by
selling dollars on the forward market, with different tenors
ranging from one month to six months and different rates.
Soedradjad said the central bank sold dollars on the forward
market, not on the spot market, so that it would not endanger the
country's foreign exchange reserves.
Bank Indonesia's managing director Paul Soetopo Tjokronegoro
said that by selling dollars on the forward market, the central
bank was not required to settle dollars right after trading but
on the due date only.
"And from our past experience in market intervention, buyers
of our forward dollars often sold back the dollars to us on the
due date. So, our reserves would not be reduced by such
intervention," Paul said.
He projected the rupiah would remain stable at between 2,555
and 2,610 against the dollar in the short term.
A dealer with a local foreign exchange bank said the rupiah
could have strengthened to below 2,550 yesterday if local players
had not bought dollars.
"I noticed when Singapore started selling dollars, local
investors bought them all," he said, adding that the rupiah was,
however, on the way to recovery.
Strong local appetite for dollars was attributed to expensive
overnight dollar deposit rates, traded at 13.0/14.0 percent
yesterday.
The central bank maintained its recent policy of keeping
short-term money relatively expensive and remained absent from
the short-term securities market. (rid)