sharon sanders
Editor-in-Chief & President
Proposed Currency Swap Agreement With America a Positive Step: Analysts
Bank analysts on Thursday welcomed the government?s move to propose a currency swap accord with the United States, saying it would help lift market confidence in the rupiah in the medium to long term.
Djoko Retnadi, an economist with PT Bank Rakyat Indonesia Tbk, said more access to foreign liquidity would mean thicker cushions to ease pressure on the rupiah.
?The government-to-government swap agreement would improve the situation because if there?s a huge amount of demand for foreign exchange we do not have to worry about it eroding our reserves.? Djoko said. ?The accord, if realized, would also provide certainty and market confidence to the country.?
Bloomberg reported late on Wednesday that Indonesia had proposed a currency swap accord with the United States to help bolster the rupiah, the second-worst performer in Asia outside Japan.
It also asked America to provide a ?contingency fund,? Foreign Minister Hassan Wirajuda said in Jakarta on Wednesday, after meeting US Secretary of State Hillary Clinton.
Indonesia?s central bank is boosting its supply of foreign exchange as the deepening global recession pummels exports, and is in talks to expand its $6 billion currency swap agreement with Japan.
The nation?s currency reserves slid to $50.9 billion at the end of January, from $60.6 billion in July, as Bank Indonesia intervened to slow the rupiah?s fall.
?What we want is to improve the market?s confidence in our economy,? Wirajuda said. ?That?s very valuable.?
Djoko, however, warned the government that the swap facility with the United States would likely not come cheap.
?The US government will get their liquidity from issuing bonds, but they have to compete with European countries which also seek funding to finance their stimulus packages. Thus, they have to offer higher rates, so if the US agrees to provide a swap facility, I don?t think it will be cheap.?
As of 8:29 p.m. in Jakarta on Thursday, the rupiah had weakened 1.3 percent to 12,080 against the dollar. A fall late in the day reversed earlier gains prompted by speculation BI may have bought the currency to stem losses.
http://www.thejakartaglobe.com/home/article/10494.html
Bank analysts on Thursday welcomed the government?s move to propose a currency swap accord with the United States, saying it would help lift market confidence in the rupiah in the medium to long term.
Djoko Retnadi, an economist with PT Bank Rakyat Indonesia Tbk, said more access to foreign liquidity would mean thicker cushions to ease pressure on the rupiah.
?The government-to-government swap agreement would improve the situation because if there?s a huge amount of demand for foreign exchange we do not have to worry about it eroding our reserves.? Djoko said. ?The accord, if realized, would also provide certainty and market confidence to the country.?
Bloomberg reported late on Wednesday that Indonesia had proposed a currency swap accord with the United States to help bolster the rupiah, the second-worst performer in Asia outside Japan.
It also asked America to provide a ?contingency fund,? Foreign Minister Hassan Wirajuda said in Jakarta on Wednesday, after meeting US Secretary of State Hillary Clinton.
Indonesia?s central bank is boosting its supply of foreign exchange as the deepening global recession pummels exports, and is in talks to expand its $6 billion currency swap agreement with Japan.
The nation?s currency reserves slid to $50.9 billion at the end of January, from $60.6 billion in July, as Bank Indonesia intervened to slow the rupiah?s fall.
?What we want is to improve the market?s confidence in our economy,? Wirajuda said. ?That?s very valuable.?
Djoko, however, warned the government that the swap facility with the United States would likely not come cheap.
?The US government will get their liquidity from issuing bonds, but they have to compete with European countries which also seek funding to finance their stimulus packages. Thus, they have to offer higher rates, so if the US agrees to provide a swap facility, I don?t think it will be cheap.?
As of 8:29 p.m. in Jakarta on Thursday, the rupiah had weakened 1.3 percent to 12,080 against the dollar. A fall late in the day reversed earlier gains prompted by speculation BI may have bought the currency to stem losses.
http://www.thejakartaglobe.com/home/article/10494.html