Currency Pressure Escalates, How Strong Are Indonesia’s FX Reserves?

Nilai tukar rupiah vs dollar AS
Summary

  • Many currencies are under pressure as risk-off sentiment spurred by US Federal Reserve tightening and fear of recession. There is a lot of speculation about what will happen next. 
  • A slowdown in commodities prices and further capital outflows threaten Indonesia’s balance of payment and foreign exchange reserves.
  • The country’s foreign exchange reserves have been under pressure since the beginning of this year. It is possible that the government will adjust the amount of global bond issuance to further support reserves and meet budget needs.
  • The Governor of Bank Indonesia Perry Warjiyo is ready to further adjust the policy stance “if necessary.” The spread between the 10-year US Treasury and the 10-year Indonesian Government Bond is getting thinner. If BI is late in responding, the cost of stabilizing the exchange rate will be expensive.

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