The start of Indonesia's tumbling foreign exchange reserves occurred in February 2018 when the Indonesian rupiah met serious pressures. Two key issues that have been damaging the rupiah over the past five months are looming monetary tightening in the USA and simmering trade concerns (the possible escalation of the US-China trade conflict).

The monthly decline in Indonesia's foreign exchange assets was attributed to government external debt repayments and the central bank's rupiah stabilization efforts. Amid the persistent high degree of uncertainty in global financial markets the central bank of Indonesia sells foreign exchange to support the rupiah rate. Over the past two months Bank Indonesia has also raised its benchmark interest rate by a total of 1 percent (which consisted of three rate hikes) to 5.25 percent. However, the rupiah remains fragile and has been among the worst performing emerging Asian currencies so far in 2018. So far this year the rupiah weakened approximately 6 percent against the US dollar.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

In a statement released on Bank Indonesia's official website, the institution informed that the current foreign reserve asset position is equivalent to the financing of 7.2 months of imports or 6.9 months of imports and servicing of government external debt, which is well above the international standard of reserve adequacy at three months of imports. Therefore, Bank Indonesia considers the current position able to support external sector resilience and maintain macroeconomic and financial system sustainability.

Indonesia's Foreign Exchange Reserves: