The Jakarta Post
Bank Indonesia (BI) believes its latest rate hike of 50 basis points (bps) will make Indonesia's financial market more attractive for foreign investors, as indicated by recent foreign capital inflows.
Indonesia welcomed Rp 7.1 trillion (US$492.78 million) of foreign capital to its sovereign bond market from June 2 to 12, mostly in long-term bonds, BI Governor Perry Warjiyo said in Jakarta on Friday.
“This shows that foreign investor confidence to enter the sovereign bond market remains high,” said Perry.
He emphasized that the central bank would use all instruments at its disposal to maintain the stability of the economy, particularly the rupiah’s stability.
In its latest meeting, BI’s board of governors raised the bank's policy rate, the BI-seven days reverse repo rate, by 50 bps to 5.25 percent in a hawkish move to raise the competitiveness of the yield of Indonesian sovereign bonds, which in turn could attract foreign capital inflows to the country.
Perry said the greenback supply to the financial market was still at an adequate level, reaching between US$500 million and $600 million per day, adding that the dollars supplied from exporters would strengthen the stability of the rupiah’s exchange rate.
The rupiah was being traded at Rp 14,358 per US dollar on Friday, according to the Jakarta Interbank Spot Dollar Rate (JISDOR), stronger than Rp 14,435 seen the day before. (bbn)