New measure as rupiah dives
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Bank Indonesia (BI) announced a new monetary instrument to add US dollar supply as the rupiah remained under pressure due to the lack of greenbacks.
A dollar shortage has been seen in the nation’s financial market as demand for safe instruments rose on resurgent fears that the global economic recovery would stall over a potential Greek euro exit and China’s economic slowdown. The reluctance of those holding dollars to sell their greenbacks and the tendency of local banks to store their foreign exchange overseas exacerbated the sell-off.
Foreign investors have dumped 6.7 trillion rupiah (Bt22.65 billion) in Indonesian stocks and 4 trillion rupiah in government bonds and afterwards demanded US dollars in exchange for their sold rupiah assets.
Rumors that BI would impose capital controls, which the central bank strongly denied, also spiked the rupiah rate to about 10,000 rupiah per US dollar at the non-deliverable forward market in Singapore – further creating panic rupiah-selling.
To boost the dollar supply, in two weeks BI will start issuing “forex term deposits” - a deposit-like instrument with tenures of between seven days and one month, allowing banks to deposit their dollars at the central bank rather than overseas.
