BI not to change foreign exchange policy
Jakarta (Antara News) - Governor of Bank Indonesia (BI) Burhanuddin Abdullah has said that the central bank would not change its foreign exchange policy in connection with the new rules of the Bank of Thailand (BoT) which restricted the flow of foreign currencies out of the country.

"Concerning regulations, we will not make any change. We will be consistent with our policy of free foreign exchange, and floating exchange rate. We feel that it is sufficient with the monetary policy in line with BI decree (PBI) 7 no. 14 which regulates speculation," Burhanuddin said here on Wednesday.

The new regulations announced by the Bank of Thailand required investors to lock up to 30 percent of foreign exchange deposits for a year to deter speculation. The Thai currency had its biggest two-day decline since April 2005.

Burhanuddin acknowledged that the BoT new rules indeed affected the Indonesian economy as it weakened the rupiah exchange rate and lowered the stock exchange index on Tuesday (Dec. 19).

"But it`s only temporary and we will first see its development in the next four days. I think the situation will be back to normal and stable," he said.

Responding to a press question, the BI Governor optimistic that the exchange rate of rupiah would be stable at around Rp9,000 since there were no worrying factors.

He also believed that the BoT policies would not affect the interest rate in Indonesia because the country`s interest rate differential was quite big and there was a space to reduce the BI rate.

"We will see the performance of our inflation due to the impacts of the real sector and rice price hikes. But, in my opinion, the interest rate differential is still big and the space to lower the BI rate is still possible," he said. (*)
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