Key points:
- The foreign exchange reserves of Indonesia increased to USD 140.2 billion in June 2024 from USD 139 billion in May.
- The reserves are now sufficient to cover 6.3 months of imports or 6.1 months of debt servicing, well above the international adequacy benchmark of 3 months.
- This rise is supported by increased tax and service revenues, government foreign loan withdrawals, and a positive export outlook.
The foreign exchange reserves of Indonesia reached a record high of USD 140.2 billion in June 2024, up from USD 139 billion in the previous month. This marks the highest level since March and reflects the strength of its economic fundamentals. The increase was primarily driven by higher tax and service revenues and foreign loan withdrawals by the government.
Picture: US dollar losing some strength against the Indonesian rupiah, observed on the VT Markets app.
How this can hit day traders
Such a reserve can cover 6.3 months of imports and 6.1 months of debt servicing substantially surpasses the international benchmark of 3 months, reducing immediate risks of currency volatility. This signals short-term stability for the Indonesian rupiah (IDR) as it should provide a buffer against potential external shocks.
However, despite the positive backdrop, the USDIDR currency pair has shown significant volatility, presenting day traders with opportunities to trade on breakout. The recent increase in reserves provided some support to the rupiah, but ongoing concerns about fiscal management and the autonomy of Bank Indonesia could still pressure the currency, creating potential for rapid intraday movements.
Cautious planning ahead
While the outlook is positive, the global economic environment remains uncertain. Potential risks such as fluctuating commodity prices or geopolitical tensions could impact export revenues and investment flows of Indonesia. It is an imperative to exercise risk management and be prepared to adapt trading strategies to sustain profitability.
