BI to improve ruling on rupiah transaction

BI to improve ruling on rupiah transaction

JAKARTA (JP): Bank Indonesia would improve the ruling on
rupiah transactions by non-residents in a bid to help stabilize
the ailing local unit, Bank Indonesia deputy governor Miranda
Goeltom said in a press statement on Friday.

Miranda said that the new ruling might include cutting down
the source of rupiah funds for non-residents which had the
potential to be used for currency speculation.

"The source of rupiah (for overseas banks) has always been the
local banks through various methods including loans, interoffice
fund placements and derivative transactions," Miranda said.

The statement was issued following a meeting of Bank Indonesia
with bankers to gather feedback over the plan to improve the
rulings.

She added that the central bank would also "clarify" the
existing rulings on foreign exchange transactions to avoid
different interpretations.

She did not provide details.

Miranda said that it was the responsibility of Bank Indonesia
to maintain the stability of the rupiah, and the central bank
would continue to improve existing rulings on forex transactions
if necessary, as long as they were being conducted within the
"corridor free capital regime and floating forex system."

The rupiah has been under pressure over the past several
months, falling to more than Rp 9,500 per U.S. dollar earlier
this month, which is a drop of more than 25 percent from the
level at the start of the year.

Currency speculation has been blamed for the drop in the
rupiah.

The rupiah ended lower at Rp 9,365 per U.S. dollar late on
Friday compared to Rp 9,270 on Thursday.

Dealers said that some banks were seen active purchasing
dollars in the last transaction day of the year 2000.

Interbank currency trading will be closed for the whole of
next week and will reopen only on Jan. 2.

Dealers said that the currency market did not react to the
meeting between bankers and the central bank on Friday over plans
to improve the ruling on rupiah transactions.

Many believed that the central bank would not take drastic
measures, but would only plug loopholes in the existing ruling.

The central bank has recently installed its officers in
certain banks, including foreign banks operating in Jakarta, to
ensure that they do not violate Bank Indonesia's forex
transaction ruling and help curb speculative activity. (rei)