Central bank (Bank Indonesia/BI) plans to take measures to lower the cost of foreign currency hedging via swap transaction. The decision is followed President Joko Widodo’ instruction to bring more foreign currencies to the country.
Lower cost is expected to attract more parties to hedging transaction, which in turn will help to stabilize the Rupiah. The main plan is to lower the premium for swap transaction with BI. The lack of activity in interbank swap market has left no option but for BI to take initiatives. One of the measures is lowering the minimum hedging transaction with BI to US$2 million from currently $10 million. Another plan is to set a ceiling on swap rate.
BI has conduct three cross foreign exchange swap auctions last May, to maintain the availability of rupiah liquidity and stabilizing interest rates on the financial market. Previously, BI made two swap auctions in the last two weeks, and once a week throughout April.