● Bank Indonesia (BI) official reserve assets fell by USD9.4b to USD121.0b as at end-March 2020

- The reserve assets remained high and sufficient to finance 7.2 months of retained imports and are 7.0 times the total shortterm external debt.

- The decline was attributable to the government’s external debt payments and intervention to stabilise the Rupiah as the rapid and wide-spreading pandemic cause a rout in the global financial market, triggering capital outflows and subsequently pressuring the local note.

● Rupiah further weakened in March as COVID-19 outbreak escalated

- It remained the worst-performing currency in Asia, depreciating by 12.2% MoM against USD to 16,310 in March, a level last seen during the 1997 Asian Financial Crisis. Rupiah is expected to remain pressured amid worseningpandemic outbreak, as the number of positive cases and confirmed deaths exceeded 2,400 and 200 respectively. Meanwhile, the government has set aside a USD25b (IDR405 trillion) stimulus package equivalent to 2.6% of GDP to combat the COVID-19 pandemic.

- Regional currencies (end of period value): Following the downtrend in March, the Thai Baht depreciated by 3.9% MoM, followed by Ringgit Malaysia (-2.5%) and Singapore Dollar (-2.3%), while the Philippines Peso bucked the trend (+0.6%).

● BI is expected to stay put despite ample room to slash rates

- Perry Warjiyo, the Governor of BI, recently stated that the central bank would take into account the stability of Rupiah before embarking on a rate cut due to heightened global uncertainties. Though we see BI still has ample room to lean towards further easing to bolster growth going forward, the probability of a further rate cut appears to be reduced.

Source: Kenanga Research - 8 Apr 2020