The Jakarta Post
Bank Indonesia will introduce domestic non-deliverable forward (DNDF) transactions on Nov. 1, a policy that is expected to ease external pressure on the rupiah.
BI monetary management executive director Nanang Hendarsah said 11 banks would be involved in a simulation for DNDF transactions. The banks are Bank Mandiri, BNI, BRI, BCA, HSBC, Maybank, Deutche Bank, Standard Chartered Bank, Bank Permata, NISP and UOB.
Nanang said the simulation or industrial testing was to assure that the infrastructure prepared to support the DNDF operation by each bank would run smoothly.
He explained that the infrastructure included devices, among other things, for page pricing for DNDF exchange rate quote, trade execution, legal contract, market-to-market mechanism, accounting record and settlement.
Nanang said BI would assure that the DNDF market mechanism would run efficiently as the it would be ready to stabilize the market under certain conditions. “For example, if there is a market disruption that causes the DBDF exchange rate to differentiate from the projected level,” he added.
The target of DNDF transactions is to provide an alternative exchange rate hedging instrument for businesspeople and investors to mitigate the risk of exchange rate fluctuations.
Unlike other forward transactions, DNDF transactions will not use US dollars but the rupiah.
“Hopefully, foreign investors who usually make hedging transactions at foreign NDF markets that often negatively affected the rupiah exchange rate will shift to the DNDF market,” Nanang said as reported by kontan.o.id. (bbn)