SINGAPORE – Singapore and Indonesia have made operational a framework for bilateral transactions between the two countries to be settled in their respective local currencies.
The local currency transaction framework, jointly launched by the Monetary Authority of Singapore and Bank Indonesia, aims to support bilateral trade and promote the wider use of local currencies in intra-Asean transactions.
Appointed cross currency dealers on each side will facilitate the settlement of current account transactions, transactions for direct investment, and cross-border payments in rupiah and Singapore dollar.
Singapore’s local banks – DBS, OCBC and UOB – are the appointed cross currency dealers in Singapore. Among the banks appointed from Indonesia are Bank Mandiri, Bank Central Asia and Bank Negara Indonesia.
The framework is expected to provide businesses and other users with greater flexibility in conducting transactions in the local currency pair, while reducing their exchange rate risks and costs, said the central banks in a statement on Aug 31.
Key features of the framework include the promotion of direct quotations between the rupiah and Singapore dollar, and the implementation of relevant rules and regulations to enhance the usage of local currencies.
The framework follows a memorandum of understanding inked in August 2022, and an agreement on the operational guidelines for the framework in April 2026 by both central banks.
Kenneth Lai, head of global markets at OСВС, said that the bank can now facilitate direct conversions between the rupiah and Singdollar for its customers with business in Indonesia.
“We hence expect more interest from our customers about such services, including hedging for this currency pair,” he added.
Wee Ee Cheong, the deputy chairman and group CEO of UOB, said that with the framework, the bank will be able to facilitate its clients’ use of local currencies for their regional operations. This will help to drive greater bilateral trade between both countries, while contributing to greater financial integration within the region. THE BUSINESS TIMES
