This follows the first agreement which was signed in 2019.
"Bank Indonesia believes that the swap arrangement renewal reflects the strong ongoing financial cooperation between Bank Indonesia and Bank Negara Malaysia, and will continue bulding market confidence in the economic fundamentals of both countries," said BI Governor Perry Warjiyo in a press release on Tuesday.
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"The renewal also shows our commitment to strengthen financial market stability by promoting more extensive use of local currencies for bilateral transactions between Indonesia and Malaysia," said Bank Indonesia Governor Perry Warjiyo.
The agreement is effective for a period of three years.
"Given the significant trade flows between Malaysia and Indonesia, we are pleased to continue our cooperation with Bank Indonesia by renewing the LCBSA," said Bank Negara Malaysia Governor Tan Sri Nor Shamsiah Mohd Yunus.
"The LCBSA supplements the Local Currency Settlement Framework (LCSF) between our two countries, an arrangement that facilitates settlement of trade and investments in local currency," he added.