Rupiah's response satisfactory: Sjahril
Rupiah's response satisfactory: Sjahril
TOKYO (Dow Jones): The rupiah's response to Friday's increase in interest rates on all maturities of Sertifikat Bank Indonesia money market instruments was satisfactory, and the central bank stands ready to adjust interest further if needed to stabilize exchange rates, Bank Indonesia (BI) Governor Sjahril Sabirin said yesterday.
Speaking in an interview with Dow Jones Newswires, Sjahril said, "The main purpose of the rate increase was to prevent the worsening of the rupiah's value. We would like to the dollar fall below Rp 9,000, but at least further deterioration of the rupiah was prevented."
The central bank raised the SBI rates Friday between four and 12 percentage points in its bid to support the rupiah. Indonesian financial markets were closed for a holiday Monday, but the announcement pushed the dollar lower to a close of IDR9,187 Friday from Rp 9,650 Thursday.
Asked if he was satisfied with the rupiah's initial response to Friday's rate move, Sjahril answered, "Yes."
Asked to comment on Indonesia's Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita's prediction earlier Monday that the rupiah would stabilize around Rp 6,000 to the U.S. dollar by the first quarter of 1999, Sjahril said that "it was very realistic to have the rupiah at Rp 6,000" to the dollar.
He said the fall of the rupiah was a "problem of confidence" and that before the news of the demonstrations he would have expected the rupiah to rise further against the dollar to below Rp 8,000, especially after the agreement with the International Monetary Fund.
But the governor said the impact of the riots, which he said the government had mostly contained, on the rupiah would be temporary. The currency was trading around Rp 9,300 to the dollar as he spoke.
As for support for the rupiah by the Bank of Japan by selling dollars for rupiah, which occurred last autumn, he said he hadn't raised the issue with the BOJ.
Sjahril said he didn't expect to discuss the topic during a meeting Tuesday with the Japanese central bank chief, Masaru Hayami, reiterating that restoring confidence in Indonesia was more important than intervention. He described the planned meeting as a courtesy call.
Nevertheless, asked whether intervention by the BOJ to support the yen would help the rupiah, he said, "I can't say there's a direct connection, but a stronger yen also will imply stronger regional currencies vis-a-vis the dollar."
On the question of whether more financial institutions will be closed, the governor said it depended on how successful their restructuring was under the Indonesian Bank Restructuring Agency.
He said "there remains a possibility" that further financial institutions may be suspended or closed and that the government "may be able to conclude in a few months" whether such steps are necessary.
But even if institutions are closed, he reiterated the government's guarantee for all deposits until January 2000, when the new deposit insurance corporation is expected to kick off.