JAKARTA - Indonesia’s central bank said it will intervene in the foreign-exchange market to prevent the rupiah from gaining too much from a possible increase in inflows following a recently passed tax amnesty law.
Bank Indonesia expects the programme to result in excess funds in the market, which it can absorb using its instruments in the currency spot market and through deposits, Deputy Governor Hendar told reporters in Jakarta late on Tuesday.
The rupiah rallied 1.2% against the dollar after the parliament passed a bill on Tuesday that allows individuals to declare and repatriate previously unreported assets held abroad. The central bank estimates the amnesty -- which takes effect in July -- will draw back 560 trillion rupiah of inflows.
“After the tax amnesty was passed, positive sentiment has returned,” Senior Deputy Governor Mirza Adityaswara told reporters. “The most important thing for Bank Indonesia is that the situation remains stable. Too much rupiah weakness isn’t good, but if it strengthens too fast then that’s also not good.”
The currency advanced 0.1% to 13,165 a dollar as of 8.30am in Jakarta, set for the highest close since April 21, according to prices from local banks compiled by Bloomberg.
The central bank plans to issue rules on money markets and negotiable certificates of deposit while also considering to extend the maturity of its foreign-exchange bills to absorb the inflows.
The full impact of the tax amnesty will probably be seen in the fourth quarter, with gross domestic product expanding 5.3% as the government boosts spending, Deputy Governor Perry Warjiyo said. The central bank expects economic growth for the full year to reach 5.1% to 5.2%, he said.