Marchio Irfan Gorbiano, Jakarta – Indonesia's foreign exchange (FX) reserves increased to US$126.4 billion in August, the most since February last year, prolonging an upward trend that has been seen since May.
The latest hike was driven by proceeds from oil and gas exports, as well as other foreign exchange earnings, Bank Indonesia (BI) reported on Friday.
The reserve level, which climbed by $500 million from July's $125.9 billion, was above the international adequacy standards of about three months' worth of imports as it is able to finance up to 7.4 months of imports, or 7.1 months of imports and payment of the government's short-term debt.
"Bank Indonesia considers that the official reserve assets position was able to support external sector resilience and maintain macroeconomic and financial system stability," the central bank said in a statement.
It also said it believed the current reserve level was adequate to withstand potential external shocks amid global economic uncertainties.
In a research note released prior to Friday's announcement, Bahana Sekuritas economist Satria Sambijantoro said the central bank was "highly calibrated" in its open market operations to guide the rupiah's exchange rate to be in line with its fundamental value. This was also supported by a relatively stable rupiah value against the greenback.
In August, the rupiah weakened by only 1.65 percent against the US dollar and even appreciated 2.38 percent against the Chinese yuan, according to Bahana.
"Was the rupiah propped up by Bank Indonesia's intervention? We don't think so, as we consider the currency's resiliency to be driven by structural factors such as a boost in the FX earnings of local exporters, rather than superficial support from the central bank," Satria wrote.