Bank Indonesia, the central bank of Indonesia, said the country's official foreign exchange reserves fell to USD $126.5 billion at the end of October 2017 (from the all-time record high level of USD $129.4 billion at the end of the preceding month).
The drop in Indonesia's foreign exchange reserves was primarily caused by the use of foreign exchange to repay government external debt and stabilize the rupiah exchange rate in accordance with its fundamentals.
Thirdly, the decline in foreign exchange assets was also attributed to local banks' lower foreign currency term deposits at Bank Indonesia. This occurred as Indonesian companies (and residents) had to repay their foreign currency liabilities.
Bank Indonesia emphasized that it remains optimistic about domestic economic conditions, particularly due to the nation's improved export performance, while global financial market developments remained conducive.
The current level of Indonesia's foreign exchange reserves is sufficient to finance 8.6 months of imports or 8.3 months of imports and servicing of government external debt repayments, which is well above the international standards of reserves adequacy at three months of imports. As such, Bank Indonesia believes the reserve assets position is able to support the external sector resilience and maintain the sustainability of Indonesian economic growth.
Foreign Exchange Reserves Indonesia:
¹ in billion USD dollar at the year-end
Source: Bank Indonesia
Between the last trading day of September and the last trading day in October, the Indonesian rupiah exchange rate only weakened 0.59 percent from IDR 13,492 to IDR 13,572 per US dollar (Bank Indonesia's JISDOR rate). However, volatility was actually rather high between both dates with the rupiah even weakening beyond the IDR 13,600 per US dollar level on 27 October 2017 amid broad US dollar strength. Hence, Bank Indonesia used part of its forex reserves to defend the rupiah and keep it stable.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia