‘Don’t Worry About Rupiah’

Jakarta Globe, February 13, 2009
 

 A money changer holds smaller denominations of the rupiah on a street in Jakarta. (Photo: Beawiharta, Reuters)

Central bank chief Boediono promised that BI would continue to defend the rupiah as the currency weakened 1.2 percent on Thursday, to Rp 11,950 to the dollar on concerns that the country’s foreign-exchange reserves were dwindling. 

“The US currently has a very strong dollar, which is not matching their economic fundamentals. The strength is also due to the billions of dollar pumped by the Federal Reserve, so there will be time for adjustment of the dollar against other currencies, making other currencies eventually appreciate against greenback,” the BI governor said. 

Boediono said BI has also been planning a second line of defense to guard the rupiah, in the form of a bilateral foreign exchange swap with Japan. 

He said that the discussion regarding the bilateral swap agreement was still ongoing and positive, “and hopefully the agreement could be signed this month.” 

Boediono’s comments came after a report on Thursday that Bank Indonesia’s moves to prop up the currency and buy up rupiah with US dollars in currency reserves were spooking the market, which believed the moves could be unsustainable. 

BI’s foreign exchange reserves have slumped 16 percent to $50.9 billion since the end of July. While the bank does not reveal how much it spends defending the rupiah, lower reserves are normally a sign of such a defense. 

The national oil and gas company PT Pertamina had also been reported as buying up $100 million to $150 million US dollars a day, according to Emanuel Kurniawan, the head of foreign-exchange trading at PT Bank CIMB Niaga, who told Bloomberg that “everybody is keeping the dollar, they don’t trust the rupiah.” 

Pertamina buys US dollars to use to buy gasoline on the international market. 

When asked about the moves, a Pertamina official scoffed at the notion that Pertamina is increasing its dollar purchase, saying instead that it was only to fulfill its regular fuel import needs. 

Frederick Siahaan, Pertamina's finance director said all the dollar transactions were made under tight coordination with the central bank. 

“Currently, our dollar transactions are bellow from last year following the decrease of fuel import values,” said Frederick. “T ransactions made this year are the lowest in three years.” 

Meanwhile a Singapore analyst said that the rupiah is moving pretty much in line with regional currencies. 

“There has been great pressure on regional currencies in the past few sessions, and the rupiah is one of them,” said Gundy Cahyadi, an analyst at Singapore based Idea Global said on Thursday. 

Gundy however, said that with its Rp 50 billion reserves, “the central bank can still hang on to the pressure on the IDR, and they should be smart enough to save their ammunition.”