BI to Sell More Greenback If Needed to Level Rupiah
Bank Indonesia governor Darmin Nasution said on Wednesday that the central bank would do whatever it takes to safeguard the rupiah by “beefing up intervention” in the foreign-exchange market.
Darmin made the comments in Jakarta in an apparent move to calm the market, which has seen the rupiah under massive selling pressure by offshore funds. The rupiah, which was the best-performing currency in the Asia-Pacific region last year, has been declining against the dollar in recent weeks as global investors pulled out from Indonesia, seeking safe-haven assets such as the dollar.
“We will guard the rupiah from falling further [against the dollar]. What we are doing now is to boost intervention,’’ Darmin told reporters on the sidelines of a seminar on Wednesday. “We hope that with the intervention, the market will calm down.”
Darmin, who was installed as governor in May 2010, did not provide the size of BI’s intervention. The central bank usually intervenes in the market by selling dollars for the rupiah.
Foreign-exchange and debt dealers in Jakarta said the central bank has been intervening in the foreign exchange market to defend the currency in recent trading weeks. At one point, BI was seen selling $400 million on Wednesday, according to some currency traders, and that was more than the usual amount of $250 million to $300 million.
“Bank Indonesia was in the market,’’ one currency dealer, who asked not to be identified, said on Wednesday. “That helped to stabilize the rupiah.”
Halim Alamsyah, a BI deputy governor, said that the central bank had spent some of its international reserves to defend the rupiah. He said that Indonesia’s foreign exchange reserve declined to $112 billion at the end of November. Indonesia’s foreign exchange reserve stood at $113.9 billion at the end of October, down from $114.5 billion at the end of September, according to BI data.
Halim did not elaborate on the amount of international reserves the bank had spent to defend the rupiah. BI, like other central banks, uses its international reserves to settle the country’s overseas debts.
The rupiah has fallen 3.5 percent this month and is poised for its biggest monthly decline since February 2009 on concern that Europe’s worsening debt crisis will slow global economic growth. The rupiah reached a 17-month low on Tuesday, according to Bloomberg.
The currency gained 0.2 percent to 9,170 on Wednesday, according to BI data, after touching 9,240 on Tuesday, the weakest level since June 2010.
“It’s the same story: the euro zone crisis,’’ a Jakarta-based currency and bond dealer said, declining to be identified.
Other currencies have also been weakening against the dollar in the wake of international investors routing money from emerging markets. Thailand’s baht has been trading at a 15-month low.
Last week, India’s rupee closed at a record low and Mexico’s peso at a two-and-a-half-year low.
BI’s Halim said that the rupiah’s decline in recent weeks could be partly attributed to strong demand by companies settling their overseas debt.
Here’s a hint of government’s response to the weak rupiah in the past 1-2 weeks, to which extent do you think is the effectiveness of the strategy? Will rupiah strengthen below 9,000 range against USD again? Which currency has the best performance against USD in 2011?