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Indonesia, Australia’s central banks extend currency swap agreement

Indonesia, Australia’s central banks extend currency swap agreement

Australia:The central banks of Indonesia and Australia have agreed to extend the Bilateral local Currency Swap Arrangement (BCSA), as the existing agreement that has been in place for three years will expire in December.

Bank Indonesia (BI) international director Erwin Haryono said in Jakarta on Thursday that the extension of the agreement was needed by Indonesia and also Australia to strengthen the central banks’ foreign exchange reserves.

Under the agreement, the value of currency swap can reach up to Rp 100 trillion (US$6.92 billion), Erwin said, adding that in implementing its monetary policy, BI could not only rely on the adjustment of its seven-day reverse repo rate.

He said the agreement would also help the government keep the economy’s resilience, particularly to maintain its current accounts.

“[Under the agreement,] trade transaction between the two countries could use the local currency, not necessarily with the [United States] dollar,” Erwin said at the central bank’s headquarters as reported by tribunnews.com.

The agreement was important because the majority of international transactions used US dollars, he said, adding that the extension of the agreement was made on the sidelines of the Central Bank’s Executives’ Meeting of East Asia-Pacific (EMEAP) in Manila on Aug. 5.

Separately, BI Governor Perry Warjiyo said the extension of the agreement would help expand the trade between the two countries because the transactions could be implemented by using the local currencies.

“The extension of the agreement reflects the wish to strengthen financial cooperation between Indonesia and Australia. Each country could use their respective currencies in the bilateral trade to reduce dependency on US dollar.