Indonesia cbank says will ensure enough liquidity amid outflows, supports rupiah


JAKARTA, May 17 (Reuters) - Liquidity in Indonesia's banking system has tightened due to capital outflows and rising demand for cash, but Bank Indonesia (BI) officials said on Friday it would continue to ensure there are ample funds in the system.

BI Deputy Governor Dody Budi Waluyo said outflows linked to the U.S.-China trade war has drained liquidity in the banking system, complicating efforts to support economic growth. He described the situation as "heading toward tightness".

Indonesia's stock index has lost around 9 percent so far this month with foreign investors posting a total of 5.6 trillion rupiah ($387 million) of net sell in local stocks.

This pressured the rupiah , which at 0330 GMT Friday traded at 14,470 a dollar, a level it hit a day before and also the weakest since January. It has lost 1.5% against the dollar so far this month.

The central bank has intervened to defend the currency, BI head of monetary management Nanang Hendarsah told Reuters.

In addition to that, Indonesians traditionally withdraw more cash from banks during the fasting month of Ramadan, a period that is also the peak of consumption in the Muslim-majority country.

"Entering Ramadan, when demand for liquidity rises, BI will make sure there is enough through an increase in monetary operation injection," Hendarsah said.

BI has increased the frequency of its open market operations auctions in the money markets to daily to evenly distribute cash among banks.

It has also prepared 271 trillion rupiah ($18.75 billion) of fresh banknotes for distribution during the holy month and in the lead up to Eid al-Fitr.

($1 = 14,470 rupiah)

This article appears in: Politics , Fundamental Analysis , Stocks , Bonds

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