Indonesia’s forex reserves reach 16-month high
Indonesia's foreign exchange (forex) reserves were recorded at US$125.9 billion in July, the highest level since March last year, creating ample room for the central bank to stabilize the rupiah as market risks heighten in the light of an ongoing trade war.
The latest reserves level, an increase from $123.8 billion in the previous month, was attributable to an increase in earnings from the oil and gas sector, as well as the government's forex debt, Bank Indonesia (BI) announced on Wednesday.
At $125.9 billion, the July forex reserves stood above international adequacy standards of three months of imports. They were enough to cover seven months of imports and government short-term external debt payments.
"The foreign exchange reserves are sufficient to support the resiliency of [Indonesia's] external sector, as well as maintain the stability of macroeconomic and financial systems," BI spokesman Onny Widjanarko said in a statement on Wednesday.
The central bank believes the current forex reserves level is adequate to withstand any potential external shock as current economic conditions, including the export performance, are deemed conducive, added Onny.
Bahana Sekuritas economist Satria Sambijantoro said in a research note that the central bank had ample room to stabilize the rupiah amid recent volatility in the currency market and shore up the yields on government bonds to prevent sharp spikes in the secondary market.
Satria added that the stronger rupiah in July was among the driving forces of the central bank’s forex reserves spike. In July, Indonesia recorded a $1.7 billion net foreign inflow, mostly in the bond market, Bahana data shows.