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BI implements DNDF transactions to stabilize rupiah
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The Bank Indonesia logo on the gate of its headquarters in Jakarta. (Antara/File)
B
ank Indonesia implemented on Thursday domestic non-deliverable forward (DNDF) transactions in a move to stabilize the rupiah exchange rate against the United States dollar.
The Jakarta Interbank Spot Dollar Rate (JISDOR) quoted on Friday the rupiah at Rp 15,089 per US dollar, stronger than its Thursday position at Rp 15,195 per US dollar.
Asian Development Bank (ADB) Institute project consultant Eric Sugandi said the central bank's move would help deepen the country's foreign exchange market.
He explained the new policy would ease rupiah volatility because of the use of Indonesian currency. “The introduction of DNDFs is expected to reduce offshore NDFs (non-deliverable forwards) that could potentially be used for speculative activities,” Eric said in Jakarta on Friday as reported by kompas.com.
Offshore NDFs, he said, usually weighed heavily country risks in calculating the forward rate, which put sellers in a stronger bargaining position, while with the DNDF, hedging transactions tended to be cheaper and more attractive.
In addition, under DNDF transactions, there was a higher chance that the JISDOR rate would be better for rupiah holders, he said.
Apart from trying to keep the rupiah exchange rate stable, DNDF transactions would help exporters, importers and investors in their domestic economic activities, thus reducing the risk of fluctuations in the rupiah rate.
About 30 banks have been involved in DNDF transactions thus far. (bbn)
