Indonesia may forge more bilateral currency swap agreements with other countries to help bolster confidence and ease the volatility of the rupiah against the US dollar, the central bank said Tuesday
Indonesia may forge more bilateral currency swap agreements with other countries to help bolster confidence and ease the volatility of the rupiah against the US dollar, the central bank said Tuesday.
Indonesia and China have just agreed on a Rp 175 trillion or 100 billion yuan ($15 billion) currency swap deal to provide short-term foreign exchange liquidity and help boost bilateral trade and investment — a move initiated by Indonesia.
Bank Indonesia Governor Boediono did not rule out possible similar deals with other countries.
“We are open [to swap arrangements] with other nations,” he said at a press conference, but declined to name the countries.
Boediono did say Indonesia would benefit greatly from similar deals, pointing out as an example Monday’s agreement with China, which he said would eventually reduce the need for US dollars, as bilateral trade between the two nations could use the currency under the swap deal.
“Transactions using dollars can be reduced.”
According to BI, Indonesia exported $11.5 billion worth of goods to China last year, while importing $15.2 billion from China.
A reduced need for dollars will be a boost for the rupiah, which has been on shaky footing of late.
On Tuesday, however, the local currency rose 1 percent to 11,465 per dollar at 4:43 p.m. in Jakarta, Bloomberg reported.
Economist Adrianus Mooy, a former BI governor, welcomed
any planned swap agreements Indonesia may forge, saying, “Our foreign exchange reserves are still limited.”
As of March 13, the country’s foreign exchange reserves stood at $53.9 billion.
Boediono said that during the current economic slowdown, clinging to a single currency, the US dollar, for trade would pose a “danger”.
“The best liquidity is a liquidity that is not dependent on the condition of a certain country,” he said.
“In my opinion, special drawing rights [SDR] can be used as international currency, although it needs global agreement. The Chinese government also wants the yuan to become an international currency, in stages.”
SDR are a basket of major currencies used in international trade and finance, usually by multilateral agencies.
BI senior deputy governor Miranda S. Goeltom said business leaders she had met in Beijing and Shanghai said they had been awaiting the currency swap.
“All this time, they have to exchange yuan to dollars when buying Indonesian products,” she said.
BI deputy governor Hartadi A. Sarwono said BI would provide regulations for banks to be able to do the currency swap.
“We will set up the requirement, then traders can go to banks for transactions,” he said.
Boediono said traders seeking to swap rupiah with yuan needed to provide underlying transactions related to imports, exports or investment.
BI has several measures to guard its foreign exchange reserves.
Under the Chiang Mai Initiative, Indonesia is set to receive a swap of $12 billion from Japan, $4 billion from China and $2 billion from South Korea.
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