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)