The central bank of Indonesia (Bank Indonesia) said the drop in foreign exchange assets in November 2017 was primarily attributed to the use of foreign exchange for repaying government foreign debt as well as to stabilize Indonesia's rupiah exchange rate (in accordance with the currency's fundamentals). Meanwhile, declining foreign exchange reserves was also attributed to banks' falling foreign currency term deposits at Bank Indonesia (this is in line with residents' necessity to repay their foreign currency liabilities).

Indonesia's foreign exchange reserves, which remained near their all-time record high position, are an important buffer to stabilize the rupiah exchange rate in times of pressure (capital outflows) that are triggered by global economic (or political) turmoil. Currently, the USA is behind many of the economic and political uncertainties or developments that are impacting negatively on emerging market assets.

For example there is the looming Fed Funds Rate hike, there is US President Donald Trump's tax reform program, there is the Federal Reserve's scaling back of its USD $4.5 trillion balance sheet. Politically, uncertainties stem from joint US-South Korea military exercises (causing North Korea to say war is inevitable), while Trump's recent decision to acknowledge Jerusalem as the capital of Israel triggered outrage, especially across the Middle East.

Although Bank Indonesia may need to use part of foreign exchange reserves to defend the rupiah in the last month of the year, Indonesia's foreign exchange reserves could rise before the year-end as the Indonesian goverment raised USD $4 billion through the issuance of global bonds in early December 2017. The government will use proceeds to finance the 2018 state budget.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia