Indonesia ‘spent $1.4b defending rupiah’

THE Indonesian central bank has spent US$1 billion (S$1.4 billion) defending the rupiah against currency speculators, Bank Indonesia governor Soedradjad Djiwandono said.

He said the measure was necessary to calm the jittery market and stabilise the rupiah after it came under strong attacks by domestic and foreign speculators.

“We have so far released US$1 billion to help stabilise the rupiah’s value,” the national Antara news agency yesterday quoted him as saying. “The rupiah is getting better with each day and its depreciation is no longer as bad as it was.”

On July 21, the rupiah reached a record low of 2,663 rupiah against the US dollar following speculative attacks on the currency.

Mr Soedradjad said the amount spent on defending the rupiah was much less than what the Thai and Philippine central banks spent to defend their currencies against speculators.

“The smaller amount for intervention is because we had taken preemptive action before the sharp depreciation of the rupiah,” he said.

He pointed out that before intervening, Bank Indonesia widened its dollar intervention band from the previous 8 per cent to 12 per cent.

He said the intervention was undertaken through forward dollar sales of between one and six months. The central bank sold dollars on the forward market, not on the spot market, so that it would not endanger the country’s foreign exchange reserves.

Bank Indonesia’s managing director Paul Soetopo Tjokronegoro said that by selling dollars on the forward market, the central bank would not be required to settle dollars right after trading.

He said: “From our experience in market intervention, buyers of our forward dollars often sold back the dollars to us on the due date.

“So our reserves would not be reduced by such intervention.”

He projected that the rupiah would remain stable at between 2,555 rupiah and 2,610 rupiah the dollar in the short term.

A analyst with a securities firm told The Straits Times the rupiah would stabilise but weaken gradually in the long term. He said it was likely to remain at between 2,680 rupiah and 2,700 rupiah against the US dollar by the end of this year.

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