SINGAPORE, Nov 5 (Reuters) - The central banks of Indonesia and Singapore on Monday said they had agreed a bilateral deal for a $10 billion backstop to help maintain monetary and financial stability after a recent bout of turbulence in markets.
The pact, which will be in place for one year, comprises a local currency swap agreement of around $7 billion equivalent and another $3 billion that allows for repurchase transactions between the two central banks to obtain U.S. dollar cash using government bonds of major countries as collateral.
Indonesia’s central bank has been recently intervening to stabilise its rupiah currency which fell to 20-year lows against the U.S. dollar amid a global rout in emerging markets.
“Economic fundamentals in the regional economies remain sound. But markets can sometimes overreact in the face of heightened uncertainty. This bilateral financial arrangement will instil confidence amongst investors,” Singapore’s central bank chief Ravi Menon said. (Reporting by John Geddie Editing by Shri Navaratnam)