2012.05.30 05:00:54 MARKET TALK: No Capital Controls Key To BI Measure - OSK-DMG

0300 GMT [Dow Jones] The success of Bank Indonesia's new measure to ensure greater U.S. dollar liquidity "will depend not just on the rate offered but also on assurances that capital controls would not be introduced," OSK-DMG Group says in a note. In an attempt to stabilize the IDR which has fallen nearly 4.0% year to date, Bank Indonesia announced Tuesday that it will soon offer term deposits denominated in foreign currency to provide local banks with an onshore investment instrument. The global environment will also play an important role in the success of the new measure as it will influence foreign investors' appetite for riskier assets, the house adds. The house does not attribute recent IDR volatility to a change Indonesia's economic fundamentals; "recent rupiah volatility could have been largely the result of a sell-off by investors on the back of global risk aversion and to realize profits from Indonesian assets." It expects the USD/IDR to hover around 9,325 by end-2Q; the pair is at 9,558. (john.phillips@dowjones.com) Contact us in Singapore. 65 64154 140; MarketTalk@dowjones.com (END) Dow Jones Newswires May 29, 2012 23:00 ET (03:00 GMT)