Bank Indonesia raised the rate it pays lenders on overnight deposits and said it was ready to buy government debt in the secondary market as Governor Agus Martowardojo moved to boost confidence in the rupiah weeks after taking charge.
The central bank raised the deposit facility rate, also known as the Fasbi, by a quarter of a percentage point to 4.25 percent at a board meeting on Tuesday, according to a statement on its Web site. The increase was a preemptive step to maintain stability after the rupiah weakened and Bank Indonesia will ensure sufficient liquidity in the market, it said.
Indonesian policymakers have struggled to contain the rupiah’s fall as a delay in fuel-subsidy cuts hurts investor sentiment, with the nation’s currency reserves dropping as the central bank sold US dollars.
Foreign investors sold stocks in Southeast Asia’s largest economy for a 13th straight day on Tuesday.
The Jakarta Composite Index fell for a fifth day yesterday, with the benchmark losing almost a 10th of its value over the period.
The rupiah weakened 0.3 percent to 9,855 per US dollar as of 2:05pm in Jakarta, prices from local banks compiled by Bloomberg show. It has declined 4.6 percent in the past 12 months and is the worst performer in Asia after the Japanese yen among 11 most-traded currencies tracked by Bloomberg.
The rupiah’s weakness is temporary, Indonesian Minister of Finance Chatib Basri told reporters.
Bank Indonesia is ready to supply dollars in a “large quantity” to stabilize the currency, as well as buy government bonds in the secondary market sold by overseas investors, Bank Indonesia Deputy Governor Perry Warjiyo said in a text message yesterday.
The central bank is prepared to purchase government debt in any amount, he said.
“Bank Indonesia is fully prepared to take necessary measures to stabilize monetary conditions in light of recent rupiah depreciation,” the central bank said in its statement. “Bank Indonesia will continue to meet the market requirement for rupiah and forex liquidity. These preemptive measures are taken to maintain monetary stability.”