By - Oct 19, 2010 12:34 PM GMT+0700
The Indonesian central bank plans to offer term deposits with longer maturities of three months, six months and nine months as it seeks to reduce currency volatility following a surge in capital inflows.
Bank Indonesia has yet to decide when to issue the new term deposits, Dyah Nastiti Makhijani, a spokeswoman at the central bank, said by telephone in Jakarta today. The current maturities are for one and two months. Bank Indonesia’s term deposits cannot be traded in the secondary market and investors must hold them until maturity, Makhijani said.
Indonesia joins countries such as Brazil and South Korea in seeking to curb currency gains as near-zero interest rates in the U.S. and Japan spur funds to seek higher returns in emerging markets. The rupiah has risen 5.2 percent against the dollar this year as investors poured money into an economy where the benchmark interest rate is 6.5 percent.
“Bank Indonesia is adding more instruments to absorb excess liquidity so it won’t interfere with the rupiah,” said David Sumual, an economist at PT Bank Central Asia. “Now it’s a good time for a deepening of the financial market when there is strong capital inflow.”
Brazil yesterday raised the tax on foreign investments in fixed-income securities to curb gains in the real.
Bank Indonesia introduced the one-month term deposit in July and the two-month deposit in October. The deposits have absorbed 52 trillion rupiah ($5.8 billion) of liquidity as of the third week of October, Makhijani said.
To contact the reporter on this story: Novrida Manurung at nmanurung@bloomberg.net
To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net
Bank Indonesia has yet to decide when to issue the new term deposits, Dyah Nastiti Makhijani, a spokeswoman at the central bank, said by telephone in Jakarta today. The current maturities are for one and two months. Bank Indonesia’s term deposits cannot be traded in the secondary market and investors must hold them until maturity, Makhijani said.
Indonesia joins countries such as Brazil and South Korea in seeking to curb currency gains as near-zero interest rates in the U.S. and Japan spur funds to seek higher returns in emerging markets. The rupiah has risen 5.2 percent against the dollar this year as investors poured money into an economy where the benchmark interest rate is 6.5 percent.
“Bank Indonesia is adding more instruments to absorb excess liquidity so it won’t interfere with the rupiah,” said David Sumual, an economist at PT Bank Central Asia. “Now it’s a good time for a deepening of the financial market when there is strong capital inflow.”
Brazil yesterday raised the tax on foreign investments in fixed-income securities to curb gains in the real.
Bank Indonesia introduced the one-month term deposit in July and the two-month deposit in October. The deposits have absorbed 52 trillion rupiah ($5.8 billion) of liquidity as of the third week of October, Makhijani said.
To contact the reporter on this story: Novrida Manurung at nmanurung@bloomberg.net
To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net
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