Indonesia's current-account deficit widened in the third quarter to its largest since the second quarter of 2014, data from the central bank showed on Friday. (Reuters Photo/Jose Luis Gonzalez)

Forex Reserves Drop by $3.1b in September: Bank Indonesia


OCTOBER 07, 2018

Jakarta. Indonesia's foreign exchange reserves dropped by about $3.1 billion in September, partly due to currency market intervention, the central bank said on Friday (05/10), as the rupiah continued to trade near its weakest in over 20 years.

A broad retreat by investors from emerging markets, high oil prices and concerns over potential fallout from an escalating trade war between the United States and China all contributed to the pressure on the rupiah over recent weeks.

The currency lost nearly 2 percent this week, and hit 15,190 to the dollar on Thursday, its lowest in more than 20 years, though it closed slightly stronger on Friday at 15,175.

Indonesia's reserves stood at $114.8 billion at the end of September, equal to six-and-a-half months of imports, the bank said in a statement, still far higher than the three-month international adequacy standard, but representing a 13 percent decline from $132 billion in January.

The September reserves level "is able to support the external sector resilience and maintain macroeconomic and financial system stability," the central bank said.

Bank Indonesia Governor Perry Warjiyo confirmed earlier on Friday that the bank has been intervening to support the rupiah, though he stressed that it has also undertaken smoothening operations when trade became lumpy.

This week, the governor said local interest rates must be raised ahead of the US Federal Reserve to avoid "drastic" outflows, in a sign that Bank Indonesia may lift rates further before a widely expected Fed rate hike in December.

The central bank has increased interest rates five times since mid-May, by a total of 150 basis points, to maintain the attractiveness of Indonesian assets for foreign investors.

Separately on Friday, Finance Minister Sri Mulyani Indrawati said authorities were assessing global developments that triggered a rally in the dollar to determine whether they need to take further steps to halt outflows, which have pummelled the rupiah.

The government has raised import tariffs, widened biodiesel use and delayed billions of dollars of infrastructure projects to cut import bills and reduce dollar demand onshore.

Sri Mulyani said the government will support businesses to export more and may provide incentives.