Meanwhile, growth of foreign exchange receipts due to the issuance of government (yen-denominated) Samurai bonds managed to somewhat offset a further decline of the country's foreign exchange reserves. In July 2015, the Indonesian government sold 100 billion yen (approx. USD $840 million).

According to a statement released by Bank Indonesia Indonesia’s foreign exchange reserves at the end of August (USD $105.3 billion) can cover 7.1 months of imports or 6.9 months of imports and servicing of government external debt repayment, which is well above the international standard of reserves adequacy at three months of imports. The central bank also stated that it is convinced that the current reserve assets are able to sustain economic growth and ward off external pressures.

Foreign Exchange Reserves Indonesia (in USD million):

However, despite having used a portion of the foreign exchange reserves, Bank Indonesia still fails to stabilize the rupiah as the currency continued to weaken against the US dollar. After Malaysia’s ringgit the Indonesian rupiah has been the second-worst performing Asian currency (against the US dollar), weakening 14.4 percent so far this year. On Monday (07/09), the rupiah depreciated 0.66 percent to IDR 14,266 per US dollar (Bloomberg Dollar Index). Therefore, Indonesia's falling foreign exchange reserves may cause additional negative market sentiments on Tuesday's trading day.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

Malaysia’s ringgit is Asia’s worst-performing currency so far this year as it has been plagued by a political scandal and plunging oil prices (Malaysia is a net oil exporter). However, recent research of Standard & Poor’s claims that Indonesia is more vulnerable to capital outflows (than Malaysia) as Indonesia’s capital market is shallower than the capital market of Malaysia hence Indonesia is relying more on foreign capital to fund growth. As such, S&P is concerned about Indonesia's foreign exchange reserves as these reserves have plunged nearly nine percent since late February 2015 due to intervention conducted by Bank Indonesia to stabilize the ailing rupiah.

So far in 2015, foreign investors have pulled USD $467 million from Indonesian shares after investing a net USD $3.8 billion into these Indonesian securities in 2014. However, S&P emphasized that Indonesia’s credit ratings are not under any immediate threat. Contrary to the other two big global credit rating agencies (Moody’s Investors Service and Fitch Ratings), S&P has not assigned the status of investment grade for Indonesia but still upholds the BB+/positive rating. However, the outlook can be changed from positive to stable provided that the government’s reform push wanes.

Indonesia is plagued by a current account deficit which means that it has been building up liabilities to the rest of the world. In the second quarter of 2015 Indonesia’s current account deficit stood at USD $4.48 billion, or 2.1 percent of gross domestic product (GDP). This means that if the rupiah continues to depreciate against US dollar (amid the looming Fed rate hike), it will be more difficult to repay its debt.