JAKARTA: Indonesia’s foreign exchange reserves fell the most in a month since the start of the COVID-19 pandemic, data from Bank Indonesia (BI) showed on Friday, as the central bank pledged to intervene in the foreign exchange market to control imported inflation to ward off.
Reserves fell $4.2 billion to $132.2 billion last month as a result of government debt payments and the central bank’s currency intervention measures, BI said in a statement.
The last time reserves fell more than they did was in March 2020, when they plummeted by $9.4 billion.
The reserve level equaled imports for 6.2 months, above an international standard of three months of imports, and was sufficient to maintain the stability of Indonesia’s external and financial system, BI said. The level was the lowest since June 2020.
BI Governor Perry Warjiyo has said the central bank has intervened in foreign exchange markets to manage the impact of the rupiah’s depreciation on domestic inflation, but said BI was not targeting a specific exchange rate level.
On July 21, he told an investor conference call that the exchange rate was “very small” due to inflation.
Inflation in Indonesia rose to 4.94 percent last month, the highest in seven years.
Like other emerging market currencies, the rupiah has weakened against the US dollar amid global monetary tightening.
However, the rupiah has fallen more than 4 percent so far this year and is one of the best-performing currencies in emerging Asia as domestic supply of US dollars was boosted by high export earnings.
Asia’s foreign exchange reserves recorded their largest six-month decline in years in the first half of 2022, demonstrating policymakers’ determination to defend currencies as they face continued downward pressure from a strong US dollar.