The central bank of Indonesia (Bank Indonesia) announced that the nation's foreign exchange reserves stood at USD $124.9 billion at the end of April 2018, down from USD $126.0 billion one month earlier. This decline is in line with expectations as the central bank had already confirmed it is intervening in the market to defend the Indonesian rupiah amid broad-based US dollar strength.
The Indonesian rupiah has been under heavy pressures due to expectations of further monetary tightening in the USA, rising US treasury yields, concerns about the breakout of a global trade war, rising crude oil prices, as well as high local US dollar demand in the April-May dividend payout season. Moreover, on Tuesday (08/05) the rupiah passed beyond the psychological level of IDR 14,000 per US dollar.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
At the moment Indonesia is the most-affected Asian emerging economy with the selloff impacting heavily on the benchmark Jakarta Composite Index, rupiah and bonds. In fact, on Tuesday, Indonesia's Finance Ministry refrained from selling bonds at a planned auction as investors asked for yields that were too high.
Several weeks ago Bank Indonesia Governor Agus Martowardojo confirmed that the central bank had been spending "a sizeable amount" of foreign currency to defend the rupiah in the currency and bond markets. In a statement released on the Bank Indonesia website on Tuesday (08/05) the central bank said the fall in reserve assets is mainly due to the use of foreign exchange for the repayment of government external debt and to stabilize the rupiah in the midst of high uncertainty in global financial markets.
From a record high of USD $131.9 billion in January 2018, Indonesia's foreign exchange assets have now declined USD $7 billion to USD $124.9 billion in April. However, the current amount is still sufficient to finance 7.7 months of imports or 7.4 months of imports and servicing of government external debt, well above the international standard of reserve adequacy of three months of imports.
Foreign Exchange Reserves of Indonesia:
¹ in billion USD dollar at the year-end
Source: Bank Indonesia