With Indonesia trailing its EM neighbors in daily FX trading volumes, and certainly leading them in trading costs from the data we see, the central bank plans to issue two new regulations to boost volumes. The first is to allow a broader list of assets to qualify for onshore currency purchases, and the second is to allow rolling of hedges with no additional paperwork provided that the onshore asset has not yet matured.
Although these are pretty minor moves in our opinion, and will do little to boost volumes and hence reduce trading costs in the short run, the spirit of the moves signals Bank Indonesia is at least aware they need to make it less painful for the market to trade IDR. Currently IDR averages $5 billion per day in FX trading volume compared to MYR at $11 billion and THB at almost $13 billion. Here’s the full read: