Rupiah extends rally against dollar
Urip Hudiono and Muninggar Sri Saraswati, The Jakarta Post, Jakarta
The rupiah continued its upward rally against the U.S. dollar for the third day in a row, following concerted measures from government agencies to defend it -- the latest being controlling the dollar purchases of state oil and gas firm PT Pertamina.
The rupiah closed its trading at 9,570 per dollar on Thursday, slightly higher than 9,573 the previous day -- and Monday's 9,750 three-year low.
The latest gain was mainly due to Bank Indonesia's increase the benchmark interest rates of its SBI promissory notes, and moves to limit the room of commercial banks for forex speculation by reducing their net open position and possibly increasing their reserve requirements stashed at BI.
The central bank will also hold more frequent auctions of its SBI notes, and roll out a new debt instrument -- the three-day fine-tuning contraction (FTK) note -- as well, to more effectively absorb any excess liquidity in the market.
Meanwhile, the State Minister of State Enterprises, Sugiharto, said the government and BI had also agreed to tightly monitor Pertamina's purchasing of dollars to a maximum of US$50 million per day.
"We have asked Pertamina to consult with BI if its dollar needs exceeds that amount," he said.
"Pertamina from now on will also get its dollars from the central bank through the state-owned banks of BNI, BRI and Bank Mandiri."
Pertamina needs about $1 billion each month to finance the country's oil imports, creating a huge dollar demand in the market which consequently puts the local unit under heavy pressure.
Commenting on the central bank's latest monetary measures, Bank Mandiri chief economist Martin Panggabean praised the efforts, particularly regarding BI's decision to be more aggressive in its intervention into the market.
"The central bank should not constrain its own monetary authority by holding only limited numbers of auctions for its SBI notes," he said.
BI usually holds auctions for its one-month SBI notes every two weeks, and for its three-month notes once a month.
Martin, however, said the government and central bank still needed to work out how to repatriate the many export revenues stored overseas.
"The government should issue a regulation requiring exporters put their proceeds back into the country after a certain time limit, like the Thai and Malaysian governments have done," he said.
"This would add our currency reserves, and therefore help strengthen the rupiah."
Bank Indonesia Governor Burhanuddin Abdullah has long voiced similar concerns about export proceeds being stashed overseas in foreign currencies, which he said had created huge discrepancy between the value of exports and the cash coming into the country, which in turn had strengthened foreign exchange reserves.
Such measures would not contradict Indonesia's free currency traffic policy, according to Martin, which was implemented in the country's agreement with the International Monetary Fund (IMF) during the 1997-1998 Asian financial crisis,
"Exporters can put their funds overseas again later on if they want to," he said.
"The important thing is to get the funds into the country first, to secure a sufficient supply of dollars in the market."