Indonesia's FX reserves drop by some $9 bln amid capital outflows

VIRUS CORONA - JAKARTA. Indonesia's foreign exchange reserves dropped by some $9 billion in March, the central bank governor said on Thursday, as Bank Indonesia (BI) intensified market intervention to manage the depreciation in the rupiah currency amid capital outflows.

The rupiah lost 14% of its value against the dollar in March as investors rushed to liquidate riskier assets amid fear of rapid spread of the coronavirus.

BI officials have said they had stepped up intervention in the spot foreign exchange and domestic non-deliverable forward markets, as well as snapping up bonds dumped by foreign funds, operations Governor Perry Warjiyo has dubbed the "triple intervention".

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Warjiyo told an investor conference call on Thursday that foreign exchange reserves had dropped to around $121 billion in March, from $130.4 billion at the end of February.

He said up to $3 billion was used for debt payments, while the rest was used "to stabilise exchange rate as well as other needs".

That was the biggest monthly drop in reserves since September 2011, according to Refinitiv Eikon data.

The governor sought to reassure investors that this level was "more than enough" to maintain market stability, saying it was 14% higher than the level considered adequate according to metrics by the International Monetary Fund.

Indonesia's benchmark 10-year bond yield jumped 1 percentage point in March to close at 7.907%. It rose further to 8.038% on Thursday.

Jakarta's main stock index fell nearly 17% last month.

During the call, the governor also reiterated that BI had room to cut interest rates further to cushion the impact of the coronavirus outbreak on Southeast Asia's largest economy.

With economic growth hit by the virus outbreak, inflation low and global interest rate policy trending down, Warjiyo said: "Actually we have room for further interest rate cut.

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"The issue with Indonesia is we have to balance between the need of maintaining inflation and supporting economic growth as well as maintaining the stability of the rupiah."

BI has cut it key policy rate six times by a total of 150 basis points since it began an easing cycle last year.

Indonesian authorities this week rolled out nearly $25 billion of additional spending on healthcare, social welfare programme and economic stimulus.

The country has reported 1,790 coronavirus cases and 170 deaths