Starting from late-January 2018 the Indonesian rupiah has been under severe pressure ahead of another looming interest rate hike in the USA (expected in March 2018). Recent positive US economic data as well as a "hawkish tone" in a statement made by newly appointed Federal Reserve Chairman Jerome Powell are behind market participants' rising expectations of another Fed Funds Rate hike.

On 25 January 2018 the rupiah still stood at IDR 13,289 per US dollar. However, by 28 February 2018 the currency had depreciated to IDR 13,751 per US dollar, a 3.48 percent decline. Bank Indonesia has been selling part of the foreign exchange reserves in an effort to support the rupiah.

Besides rupiah stabilization efforts, Indonesia's foreign exchange reserves also declined due to banks lower foreign currency term deposits at Bank Indonesia. This is in line with residents' necessity to repay foreign currency liabilities.

According to Bank Indonesia, the nation's foreign reserve assets at end-February are sufficient to finance 8.1 months of imports or 7.9 months of imports and servicing of government external debt repayments, well above the international standards of reserves adequacy at three months of imports.

Hence, Bank Indonesia emphasizes that the current reserve assets remain adequate to support external resilience, especially considering Indonesia's economic growth outlook and export performance outlook are both positive. Moreover, there will be additional incoming foreign exchange receipts stemming from the government's global sukuk (Islamic bonds) issuance of USD $3.00 billion in March 2018.

Foreign Exchange Reserves Indonesia:


 2010  2011  2012  2013  2014  2015  2016  2017
Foreign Exchange
 66.1  96.2 110.1 112.8  99.4 111.9 105.9 111.5 130.2

¹ in billion USD dollar at the year-end
Source: Bank Indonesia