Central bank says time ripe to sell U.S. dollars
Central bank says time ripe to sell U.S. dollars
JAKARTA (JP): Bank Indonesia (BI) deputy governor Miranda
Gultom said on Wednesday that the central bank was ready and in a
good position to sell its U.S. dollars in a bid to help ease
pressure on the rupiah.
Miranda said the central bank now had a relatively ample
amount in its foreign exchange reserves to intervene in the
currency market.
She pointed out that the central bank's net international
reserves were about US$18.3 billion, which was much higher than
the minimum $15.2 billion adjustment target set by the
International Monetary Fund (IMF).
"Now is the right time to sell our U.S. dollars," she told
reporters during a weekly gathering.
Separately, Bank Indonesia Governor Sjahril Sabirin said
earlier on Wednesday that the central bank would intervene in the
currency market to help the ailing rupiah by selling its dollars.
The rupiah continued to weaken on Wednesday amid renewed
political jitters sparked by the dismissal of two senior
economics ministers on Monday by President Abdurrahman Wahid.
The local unit closed at Rp 8,020 to the U.S. dollar, the
lowest level in six months, compared to Rp 7,935 during the
previous day.
But Miranda stressed that the primary goal of the central
bank's market intervention was not to support the exchange rate.
"Our main target is inflation, not the exchange rate ... We
have to be consistent," she said, but she added that the indirect
effect of supplying more dollars on the market would help ease
pressure on the rupiah.
She said the main objective of selling dollars was to limit
the disposal of Bank Indonesia promissory notes (SBIs) in order
to minimize the cost of interest charges to the central bank.
The promissory note is one of the central bank's instruments
used to adjust the domestic liquidity condition, which also
indirectly affects the exchange rate of the rupiah.
She added that part of the central bank's huge foreign
exchange reserves was generated by the windfall from oil prices
received by the government.
Miranda remained optimistic that the central bank's inflation
and gross domestic product (GDP) targets were still within reach
despite the current weakening of the rupiah.
"We're not worried (by the weakening of the currency), but
we're alert," she said.
She saw the weakening of the rupiah as only a temporary
phenomenon, as indicated by the strong demand on promissory notes
at the regular Wednesday auction.
She said that the central bank auctioned Rp 26 trillion in
one-month promissory notes, well above its initial target of 21.5
trillion on Wednesday.
"This means that the market still believes that the current
weakness is temporary," she said.
"If the (weakening of the rupiah) is seen as permanent, people
will not spend their rupiah to buy SBIs, but will use it to
speculate on the foreign exchange market," she said.
The interest rate on one-month promissory notes fell slightly
to 10.88 percent from 10.92 percent last week.
Miranda was also optimistic that the rupiah would get stronger
once all the "negatives" were eliminated.
She said that Standard & Poor's rating agency was expected to
"soon" revise the credit rating of Indonesia's long-term foreign
currency issuer which was recently downgraded to selective
default.
Miranda said the problems with the IMF caused by the delays in
the implementation of the economic reform programs were settled.
In fact, visiting IMF acting managing director Stanley Fischer
gave a positive note of confidence on the progress of the
government's reform programs early this week.
Miranda hoped President Abdurrahman would be able to ease the
political jitters created by the dismissal of two ministers on
Monday. (rei)