IDR: FX curbs and bond support to steady currency – DBS

DBS Group Research’s Radhika Rao highlights Bank Indonesia’s latest steps to manage FX volatility and support the Indonesian Rupiah. The central bank has tightened documentation thresholds for Dollar purchases, continued bond buying and enabled selected dealers to access offshore NDFs. The risk of further FX restrictions is seen easing if a US–Iran ceasefire stabilizes regional currencies.

Bank Indonesia tightens FX access

"As part of a seven-step agenda, Bank Indonesia tightened the limit on foreign currency purchases, without supporting documents, to $25k from $50k monthly cap, after similar action last month."

"BI’s move to further tighten the FX threshold aims to streamline demand for US dollars and ensure purchases are tied to genuine underlying needs rather than speculative activity."

"Other steps include plans to continue with bond purchases (IDR 123trn purchases ytd) in coordination with the MOF."

"Besides strong intervention presence, attractive SRBI returns have also drawn offshore investors in recent weeks."

"The risk of additional FX curbs/ measures will diminish if a US-Iran ceasefire provides a breather to the regional currencies."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)