Indonesia's central bank has launched a new exchange-rate hedging instrument called Vastra to help foreign investors manage currency risk in their Indonesian asset portfolios. Bank Indonesia Deputy Governor Thomas Jiwandono said on Wednesday that Vastra will make it easier for foreign investors to access hedging transactions through overseas banks directly connected to partner banks in Indonesia. Investors can carry out back-to-back hedging transactions through partner banks at home and abroad without submitting documentation of underlying transactions or assets. Initially, Vastra mainly covers instruments in rupiah investment portfolios, namely government bonds, Bank Indonesia rupiah debt securities, and Bank Indonesia foreign-currency Sukuk instruments, with possible expansion to other instruments in the future. Vastra supports forward transactions, domestic non-deliverable forwards, and swap transactions, but not spot transactions. For buying foreign currency against rupiah, the maximum limit is set at no more than 100 percent of the value of assets in the investor's portfolio in Indonesia, while for selling foreign currency against rupiah, the maximum limit is set at 25 percent. The instrument also gives investors access to Bank Indonesia hedging tools, including domestic non-deliverable forwards and swap transactions with the central bank.
Bank Indonesia launches Vastra hedging instrument to facilitate currency risk management for foreign investors, likely increasing demand for rupiah and supporting IDR.
