Indonesia's central bank has tightened its rules for domestic purchases of US dollars as it tries to bolster the fragile rupiah. Effective immediately, Bank Indonesia said dollar purchases at banks or money changers above $25,000 require a document showing the underlying transaction, such as payments for imports, school tuition and health treatment abroad, or offshore loans.
The previous threshold for buying dollars without documents was $100,000. "With this improvement in our regulation, we hope the domestic foreign exchange market will become more stable and will reflect the real demand of foreign exchange for people's economic activity," Bank Indonesia said in a statement issued late on Friday. Indonesia's rupiah is emerging Asia's second-worst performing currency, shedding nearly 12 percent this year. The currency hit a 17-year low on Thursday before strengthening more than 1 percent on the central bank's direct intervention. It closed at 13,980 per dollar on Friday. Bank Indonesia has said its focus for monetary policy was maintaining the rupiah's stability and has introduced several measures to support the currency.Will not follow competitive FX devaluation.
Indonesia's central bank governor said that Bank Indonesia was always in the market to stabilise the rupiah's movements against the dollar and will not take part in competitive devaluation. "In other countries, weakening the currency is to maintain competitiveness, but Indonesia depends on primary material exports and will not really benefit from a weakening rupiah. We will not follow competitive devaluation," Agus Martowardojo said, adding that he believes the rupiah is undervalued and its decline has overshot. The rupiah breached 14,000 per dollar on Monday, its weakest since July 1998.