B

ankers are hoping that the central bank'€™s newly issued policy package will help strengthen the rupiah, which has been under pressure amid the country'€™s weak economic growth.

The Bank Indonesia'€™s (BI) policy package, which was announced on Wednesday evening along with the government'€™s set of economic measures, aims to sharpen monetary policies including efforts to stabilize the rupiah.

The Indonesian currency further dropped to Rp 14,332 per US dollar on Thursday, its lowest level in 17 years. The rupiah has lost 14 percent this year, among the second worst currency performer after the Malaysian ringgit.

Haru Koesmahargyo, finance director at Bank Rakyat Indonesia (BRI), was convinced that the policy would be effective to help stabilize the rupiah in short term as BI improved its rupiah and foreign exchange (forex) instruments.

Haru said he agreed with the central bank'€™s decision to reissue BI certificates (SBI) with longer maturity, namely nine and 12 months, as well as extend tenure of forex term deposit to three months.

'€œBI has extended the tenures of forex term deposits and BI certificates [SBI], which will push banks to calculate their liquidity needs more carefully,'€ Haru told The Jakarta Post on Thursday.

Haru also said that BI offered higher yields when the central bank changed the instruments'€™ previous variable rate into fixed ones as it would attract more placements, so that the volatility of the US dollar could be minimized.

As for forex supply and demand management, Haru said the central bank'€™s more restrictive measures in relation to foreign exchange trading would decrease the possibility of speculation without the need to limit the maximum amount.

In its policy package, BI tightened forex purchases so every forex purchase of more than US$25,000 will require an underlying reason and taxpayer number to be provided. The threshold was $100,000 previously.

Meanwhile, HSBC Indonesia managing director Ali Setiawan was quite skeptical about the policy'€™s effectiveness in reducing rupiah depreciation as the same policy had been introduced before and would not create additional supply of US dollars in the market.

'€œRight now, the market needs a significant supply of US dollars,'€ Ali told the Post.

Iman Nugroho Soeko, treasury director at Bank Tabungan Negara (BTN), said some unpredictable variables, such as the behavior of market players and retail depositors, could determine the effectiveness of the BI'€™s policy, hinting at a strong possibility that the forex market could be easily swayed by speculation.

'€œThe rupiah will be stable as long as the currency is deemed as merely a medium of exchange. However, it will be difficult for the policy to become effective when many players regard the currency as a commodity,'€ Iman said.

The central bank'€™s policy package contains five points of monetary measures: inflation management, maintaining rupiah stability, rupiah liquidity management, foreign exchange supply and demand management, as well as expanding the financial market.

The monetary package was also accompanied by a micro-prudential measure currently under preparation by the Financial Services Authority (OJK) to help stabilize the rupiah. The planned measure is to allow foreign tourists to open bank accounts with only a passport required for accounts worth up to US$50,000. For accounts of more than $50,000, passports and other administrative paperwork will be needed.