JAKARTA: Indonesia's central bank expects its agreements for trade and investment settlements in local currencies with four other countries to reduce US dollar demand by $2 billion this year, an official said on Wednesday.

Bank Indonesia (BI) has struck local currency settlement deals with monetary authorities in China, Japan, Malaysia and Thailand in the last few years, aimed at cutting dollar demand and making the rupiah currency more stable.

The deals facilitated transactions worth the equivalent of $800 million last year, up from $350 million in 2018, BI's director of financial market deepening Rahmatullah Sjamsuddin said.

In the first seven months of 2021, such transactions reached $1.2 billion, with Japanese yen-Indonesian rupiah exchanges registering the biggest rise.

"We may see $2 billion (worth of local currency settlements) in 2021," he said, noting that a new deal with the People's Bank of China, launched on Monday, could expand the figure further as China is Indonesia's biggest trade partner and a leading investor.