theIndonesian – Bank Indonesia (BI) is scheduled to announce its April foreign exchange reserves position tomorrow (8/5/2024).
Considering the pressure faced by the rupiah during April, which fell 2.55 percent to its weakest level in the last four years at IDR 16,260/US$, the value of Indonesia’s foreign exchange reserves has the potential to be drained much more than the previous month, which had fallen by US$3.6 billion.
Bank Indonesia intervened heavily when the rupiah collapsed to Rp16,200/US$ when the market opened after the Lebaran holiday.
Intervention was carried out in the spot market and the domestic forward market (DNDF) as well as the government securities market (SBN). Intervention in the spot market is more costly than in the domestic forward market.
The NDF contract, as the name implies, is nondeliverable so that it will only settle later according to the time period. When the rupiah shock peaked, the 1-month NDF contract once touched IDR 16,332/US$. While the 6-month and 12-month contracts were perched at IDR 16,424/US$ and IDR 16,533/US$ on April 16.
BI’s response to raise its benchmark interest rate to 6.25% on April 24 did not immediately bring the rupiah back below Rp16,000/US$. As of today, the rupiah is still weakening, closing at IDR 16,046/US$, down 0.13% compared to yesterday.
Bahana Sekuritas calculates that during the turbulence period that befell the rupiah, BI flushed the market with at least US$250 million per day so that the value of foreign exchange reserves could potentially be depleted by up to US$5 billion.
If the estimated US$5 billion decline in foreign exchange reserves is correct, then in four months this year, Indonesia’s foreign exchange reserves have fallen to US$11 billion. This would be a record decline and the longest period of decline, four consecutive months, at least since the Covid-19 pandemic when the value of foreign exchange reserves fell to US$9.47 billion in just one month in March 2020.
The Indonesian
