Bank Indonesia intervened the spot foreign exchange market, domestic NDF and bond markets to stem outflows related to fears of the spread of coronavirus in the world - Photo: Antara

JAKARTA (TheInsiderStories)Bank Indonesia (BI) is intervening in the bonds, currency and non-deliverable forwards markets on Monday (02/03) to protect the rupiah from the coronavirus spread. Rupiah closed down 0.63 percent to the level of Rp13,741 per US dollar on Monday and as many as 312 shares fell, making the Jakarta Composite Index (JCI) down 55.87 points to 5,884.17.

As many as 107 shares the price went up, 312 shares went down, and 123 shares stagnated. Daily transaction value on the Indonesia Stock Exchange (IDX) reaches Rp6.66 trillion (US$475.71 million). Foreign investors recorded net-sell transactions in all markets amounting to Rp595.47 billion.

To guard the nation’s currency and bonds, the monetary authority buys Rp1.5 trillion of bonds from the secondary market on Monday, Nanang Hendarsah, the central bank’s executive director for monetary management, told Bloomberg. The currency posted its first weekly loss in nine as foreign investors pulled out more than $560 million in the first three days of last week from the nation’s sovereign bonds.

“BI is making sure of rupiah’s stability. The bank is boldly buying bonds in the secondary market and is offering domestic non-deliverable forwards through eight brokers,” he said, adding that intervention was also done in a measured way in the spot FX market.

The decline brought Rupiah ranks second weakest Asian currencies after the Chinese yuan in Monday’s trading. The Chinese yuan exchange rate fell sharply to 1.57 percent, according to Bloomberg.

The weakening of the exchange rate was also suffered by almost all Asian currencies, such as the Japanese yen fell 0.21 percent, the Hong Kong dollar fell 0.04 percent, the Singapore dollar 0.23 percent, the Taiwan dollar 0.18 percent, the South Korean won 0.27 percent, Indian rupees 0.26 percent, and Malaysian ringgit 0.39 percent. Only Philippine pesos and Thai baht still strength with increases of 0.02 percent and 0.35 percent, respectively.

As the virus continues to spread rapidly beyond China’s borders, prompting extraordinary travel restrictions by several countries including Indonesia, policymakers around the world are stepping up action in response to a global sell-off. China reduced rates by 10 bps and injected $174 billion cash into the financial system Monday as markets plunged on the resumption of trade after the Lunar New Year break.

BI Governor Perry Warjiyo last week warned of unprecedented fears as the virus continued to migrate beyond China and the epicenter of the epidemic in Wuhan. Indonesia has ordered the suspension of direct flights to and from mainland China as of Feb. 5 and has already halted visa on arrivals for Chinese citizens.

“So far what we have felt, and also other central banks are also feeling, is the impact of the coronavirus through the financial markets. We are seeing reversals including from equities and bonds,” Warjiyo told at a Bank Indonesia conference in Bali.

Warjiyo said authorities are working to minimize the spread of the virus in Indonesia, including its main tourist spot of Bali. After a volatile 2019, Warjiyo said the global environment remains challenging, especially for emerging markets such as Indonesia. He called for greater coordination between monetary and fiscal authorities to support growth.

US$1=Rp14,000

Written by Lexy Nantu, Email: lexy@theinsiderstories.com