BI: Corporate Demand for Dollar is Not Reason Behind Rupiah Depreciation

KATADATA ? According to Indonesian Central Bank (BI), the rupiah?s recent decline is due to external factors. The local corporate demand for foreign currency including Pertamina?s demand for US dollar to import fuel only play a minor role in putting downward pressure on rupiah.

?I think it?s a common thing to import fuel using US dollar. But it will not cause (the rupiah to weaken). It?s not because of Pertamina,? said BI?s Deputy Governor Mirza Adityaswara Friday (8/7) at his office.

According to him, the rupiah?s latest weakening is due to external factors, especially to anticipate the increase in the Fed Rate. It?s because the rupiah?s recent decline is different than 2005 and 2008. During those years rupiah was depreciated alone.

"Now other currencies are also experiencing the same. It?s more general,? said Mirza.

Pertamina admits that they need a significant amount of US dollar to import crude oil. Pertamina?s Vice President of Corporate Communication Wianda Pusponegoro said that Pertamina needs around US$70 million or equal to IDR945 billion a day to import crude oil for their refineries to produce around eight million barrels of Premium and hundreds thousand barrels of diesel fuel.

The state oil firm currently hedges around US$2.5 billion at Bank Indonesia (BI) to meet its demand for US dollar so it doesn?t have to purchase a huge amount of US dollar everyday in the spot market. This is to protect the company from foreign currency exchange loss due to the depreciation of rupiah.

On the other hand, Pertamina?s hedging policy will not weaken rupiah. After all, it will not use the whole fund. ?It?s only an upper ceiling. It will only be used as needed,? she said.