Indonesia's forex reserves drop to $132.2 billion in July

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JAKARTA : Indonesia's foreign exchange reserves fell the most in a month since the start of the COVID-19 pandemic, Bank Indonesia (BI) data showed on Friday, as the central bank pledged to intervene in the foreign exchange market to ward off imported inflation.

Reserves dropped by $4.2 billion last month to $132.2 billion due to payments of public debt and the central bank's currency intervention measures, BI said in a statement.

The last time reserves fell by more than that was in March 2020, when they plummeted by $9.4 billion.

The reserve level was equal to imports for 6.2 months, above an international standard of 3 months of imports, and was adequate to maintain Indonesia's external and financial system stability, BI said. The level was the lowest since June 2020.

BI Governor Perry Warjiyo has said the central bank has been intervening in currency markets to manage the impact of the rupiah's depreciation on domestic inflation, but he said BI was not targeting any specific exchange rate level.

On July 21, he told an investor conference call the exchange rate pass through to inflation had been "very small".

Indonesia's inflation rose to 4.94 per cent last month, the highest in seven years.

Like other emerging market currencies, the rupiah has weakened against the U.S. dollar amid global monetary tightening.

However, down more than 4 per cent so far this year, the rupiah is among emerging Asia's best performing currencies, as domestic supply of U.S. dollar got a boost from high export earnings.

FX reserves in Asia recorded their biggest six-month decline in years in 2022's first half, a testament to policymakers' determination to defend currencies facing persistent downward pressure from a strong U.S. dollar.

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